Imagine that you are the heir to your grandmother’s estate. You cared deeply for your grandmother in the years leading up to her death. Due to her deteriorating health, she moved into your home before her eventual passing. The family home became vacant and began to fall into disrepair while she lived in your home. After her passing, you volunteered to serve as the administrator of her estate and stepped forward to handle the legal issues with the property.
Although the property needs substantial rehab, it would make an excellent investment property for a developer. You and the family members decide that it would be best to sell the property and distribute the proceeds among the heirs.
After engaging a realtor, the last recorded deed is retrieved. The deed shows a recent transfer to “ABC Investments LLC.” The deed purports to contain your grandmother’s signature, but it was allegedly signed six months after her passing. The property was stolen by a fly-by-night investor with the hope of flipping the property to an unsuspecting person. The investor’s fraud created a severe title problem for you and the heirs. The property cannot be sold and the inheritance money distributed until the title is recovered.
Stolen title is one of many title problems that can be solved with a Quiet Title lawsuit. Quiet title lawsuits can settle almost any interest in a property. Some quiet title actions are deeply adversarial while others are used to correct a defect in the chain of title.
Carol is a realtor friend of mine with whom I recently told me about lost real estate sales. She was trying to carve out a niche in distressed properties, but encountered recurring roadblocks that were costing lots of time. The problems often start the same – she will locate a prospective seller of a property located in a neighborhood undergoing heavy development. The rightful owners agree to sell the property, but legal roadblocks cause severe delays or lost sales.
Carol was on the verge of walking away from distressed properties because of the frustration she was experiencing. She was especially aggravated by the difficulty of determining at the start whether a messy title situation was worth getting involved in. The key thing she wanted to know was whether a particular situation had straightforward fix or to walk away.
Below are six common distressed property situations and how to resolve them.
Our office recently assisted Anna, an investor who loaned $125,000 to a real estate developer. The developer purchased three properties with the goal of developing them for eventual resale. Anna entered into a mortgage and security agreement with the developer to fund the renovations. Her loan was guaranteed by the borrower’s pledge of the first property as collateral.
Unfortunately the renovation did not go smoothly. Development became so problematic that the borrower decided to sell the pledged property rather than continue development. The ensuing delays led to a cash crunch for the borrower and a default on Anna’s loan.
Anna had a close relationship with the borrower and so she extended a forbearance. The forbearance agreement permitted the borrower to sell the problematic property while also protecting Anna. The borrower pledged the remaining two properties as collateral in the forbearance agreement. With the first property sold the borrower could resume payments and develop the two remaining properties.
But the borrower again ran into difficulties renovating the remaining properties and soon defaulted once more. With the two remaining properties being her only protection, Anna knew she had to act.