How I Finally Closed the Foreclosure from Hell

Never in my life did I have the closing as difficult as this one. Using ideas from Joe Kaiser’s course, Totally Dominate Your Foreclosure Marketplace, I spotted the pre-foreclosure property, and the owner called me after receiving my little card in the mail.

It was a fourplex which had three units vacant and needed about $4K or $5K in fix up. The owner had a balloon payment coming due which he could not refinance because there was over $330K in judgment liens from seven creditors attached to the property.

The comps showed four other fourplexes just sold on the very same cul-de-sac for $100K each with new conventional financing. The owner’s loan balance was only about $60K. In his perception, however, the deal was not doable because of the liens.

I had about two and a half weeks prior to the sale, so I negotiated to get a one-month extension from the foreclosing bank. I got the information about the judgment holders and sent FAXes offering token amounts to release the property from the liens. Within about a month and a half of head-splitting negotiations, I obtained all the releases for a total of under $5,000.

[Editor’s Note: I sure would like to know how Alex negotiated over $330K in judgment liens down to a $5K payoff. That’s a “success story” by itself!]

I lined up a private loan for $70K to cover the pay off and all closing costs, and a I had a new buyer for $90K with $15K down and six months seller financing. When I thought I had everything under control, two more title problems came up.

There was one more judgment lien that was paid in cash in full by the seller through the execution of judgment at the constable office, and we had receipts for that. However, the holder did not file the release. The judgment holder did not return calls with requests to release.

The title company would not remove an objection until a friendly attorney called the title company and convinced them to accept the receipt from the constable office in lieu of release.

The last hurdle was really unpredictable. There was an exception on the title commitment on the release of the older first mortgage from the previous owner for $140K. We presumed that the local title agency who handled the closing for the current owner in 1988 just forgot to record the release for that older loan.

My title company told me it was a matter of getting an indemnity letter from them. Well, we could not get the letter because the current owner had not purchased the owner’s title policy at the time of his closing. The loan was supposedly paid off, but the release was not found. Since 1988 the lender who was paid off was absorbed by RTC, and the papers disappeared somewhere.

The foreclosing lender, however, had a mortgagee title policy, which is what saved us. We went to the title company, signed closing papers, and deposited the funds in escrow.

My closing agent called the attorney at the title insurance company that issued the mortgagee policy and explained that if the property forecloses, and the lender then attempts to resell it, there would be a claim by the lender for $140K against that policy. The attorney went to their chief-of-staff, and we got a call back in five minutes confirming that I’d get a title policy. What a learning experience.

P.S. If I ever again bid on a trustee sale at the courthouse, I’ll be darned not to rely upon my own title search and think of some negligent title company agent who has not recorded proper releases.

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