A pre-foreclosure sourced from a property manager's own book, and how the equity picture fell apart at title

Was a discounted payoff on a junior lien like a HELOC ever realistic in a 79 day runway, or is that the part worth being skeptical about? Genuinely asking, because most accounts of this describe negotiating a junior lien down like it's a phone call and a fax.

The structural point in trellis's post is that a pre-foreclosure offer has to be priced against the whole recorded lien stack, not the loan that filed the notice. The notice of default only tells you one lienholder ran out of patience. A HELOC, an HOA assessment lien, a judgment, or a tax lien can all sit behind it and all have to be dealt with before clean title transfers.

On kestrel's question, a junior lienholder facing a senior foreclosure is in a real position: if the sale price doesn't reach their position, they get nothing. That gives them a reason to take a discount. Whether they will, and how fast, depends on whether the loan is still with the original lender, whether it has been charged off or sold to a debt buyer, and whether the servicer has authority to approve a short payoff without investor sign-off. That last item is the assumption the whole plan rests on. If approval has to go up to an investor, weeks is normal, and 34 days of owner silence eats the entire window.

Two mechanical points. Nothing moves until the borrower signs a third party authorization letting the servicer discuss the account with you, so that document belongs in the first meeting. And priority rules, redemption rights, and the amount of notice required before sale all vary by state, including some states where a sale can be pushed to a different date than the one first published, so confirm your specific timeline with a local closing attorney or title company rather than with a national article.

HOA lien treatment in a senior foreclosure is also state-specific, and in a few states assessments get a limited super-priority slice. That determination is a legal one for counsel in that state.

26k on a rental that's been owned by someone who couldn't make payments for eight months. Deferred maintenance always tracks the payment history. I would have expected 26 to be the number for cosmetics only and then found the HVAC dead, the water heater weeping, and a shower pan someone "fixed" with caulk. Your deal died on the lien stack, so you never got to find out, which is the one mercy in the story.

The HOA number keeps growing because of legal fees, and that catches people off guard. It compounds monthly and the attorney adds a fee every time they touch the file.

Can someone explain second position plainly? I think it means the HELOC was recorded after the mortgage so it gets paid after, and if the sale money runs out they just lose. Is that right, and does the second lender have to agree to anything at all if trellis buys before the auction?

Rigging, yes on the order of payment. The reason the second matters in a normal sale is that they have to sign a release for title to clear, so their agreement isn't optional even though their money position is weak.

Trellis, the number I keep coming back to is 2,350 of hard cost on an attempt that died. Do you now budget a per-attempt loss figure, and what is it? I'm trying to work out what my first year actually costs and "deals that don't close" is the line I have no data for.

Worth pulling the assignment chain on the HELOC before writing it off. A 41k drawn balance on a line that stopped performing has usually been frozen, sometimes charged off, and if it has been sold once or twice the current holder's basis in it may be a fraction of face. That is the kind of file where a discounted release actually happens. The other document worth pulling is the HOA's recorded declaration, not just the lien. The declaration is where the fee-shifting language lives, and a collection attorney's ability to keep adding to a balance like 6,800 comes from a clause the owner signed at purchase and likely never read.

The part that stings reading this as someone with zero deals is that you lost a paying client by trying to buy from him. Does that change whether you'd source from your own book again, or is it just the price of having better information than anyone else on that street?

I'm working through licensing right now and this thread is the exact situation my course material skates past. Trellis, when you manage a property and then offer to buy it, you're on both sides of somebody's worst month. Disclosure duties for a manager who becomes a principal buyer vary by state and can be a licensing issue, so that's a question for the state commission or a real estate attorney rather than a forum. I'd want it in writing before I made the offer, not after.

Push back on the framing. The liens made the deal harder. The 34 days of the owner going silent is what actually killed it. Deals with worse lien stacks have closed because the seller signed everything the day it was put in front of him. A motivated seller on the phone with no signature discipline, discovered too late to leave enough runway, turns a 60 day job into a 45 day one. Everything downstream of that is just arithmetic.

Quarry's half right. My rule after eating one of these is that nothing gets a price until I have a search back, and I pay 175 for a same-day two-owner search from a local abstractor rather than waiting on a full commitment. It isn't insurable and it misses things, but it catches recorded seconds, HOA liens and judgments 90 percent of the time, and it turns a three week question into a one day question. On thin windows that's the whole game.

Flint, 175 and a day is worth updating a mental model over. A common assumption is that the lien picture cannot be known without committing to a full title order and two weeks, and that turns out not to always be true.

So the attempt budget looks like 175 for the quick search, then a few hundred more only on the ones that survive it. That's a completely different number than trellis's 2,350 and it's the first version of this cost I can actually plan around. Still going to assume most attempts die.

Reading the whole thread, the sequence you needed was mechanical and you had it backwards. One, authorization signed at the first meeting, before any price talk. It costs the owner nothing, it doesn't commit him to selling, and without it you're blind for weeks. Two, quick lien search before you name a number, flint's 175 version. You price against total recorded debt plus your repair figure, never against the first mortgage payoff. Three, repair reserve sized for a house whose owner has been broke for eight months. On the construction side, the operators who get this right bid the walkthrough plus 30 percent rather than the walkthrough alone, because the failures cluster. If someone skipped a mortgage payment they skipped the plumber first. Four, the auction date is the only number in the deal that doesn't move for you, and every other step gets scheduled backwards from it. If a discounted junior payoff needs 30 to 60 days of servicer time and you have 45 days left, you don't have a deal, you have a lottery ticket. Whether the sale date can shift at all depends on the state and on what the trustee or court does, so that's a local closing attorney question and not something to assume from the internet. The client loss is real but it's a separate problem. You told a man you'd buy his house and then couldn't, in the month he lost it. He wasn't going to keep you either way.