2nd mortgage responsibility after taking over primary

Asked by Dr. B, Bovey, MN Tue Jul 20, 2010

My business has been purchasing a "house" from my brother contract for deed for the past 2 years. He has a 102k mortgage through BOC as primary and a15k 2nd mortgage (Citibank) remaining. He has not followed through in the past few months on paying the remaining balances and they are threatening foreclosure. If I were to take over the BOC mortgage in my name, he is supposedly still responsible for the 2nd mortgage, not me. Is this true and what happens if I wanted to sell the property in the future if the 2nd one is not paid off?

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Susan Hoffla…, Agent, Shoreview, MN
Tue Jul 20, 2010
I agree with Aaron. You have not "purchased" anything. You are not liable for anything. You are like a ton of other renters out there whose landlords are not making their mortgage payments with the rent money that's being paid. Until the bank actually forecloses (meaning sheriff's sale and the expiration of the redemption period after that), your brother is still the owner of record on the property. If you continue to pay him rent, KNOWING he's not making the payments, you will ultimately be evicted when the foreclosure happens.

Now, you might be able to work out a deal to buy it as a short sale. But, you and your brother will have to go through ALL of the same channels that every other short sale buyer and seller are going through right now. And, because there's a second mortgage, you may come to an agreement with the first mortgage, but the second might not agree, which would result in a foreclosure anyway.

Very tricky business, my friend. I suggest you talk to an attorney or talk to an agent that specializes in short sales and foreclosures in your area.
Web Reference:  http://www.homestosellmn.com
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Brad Anderson, Agent, Maple Grove, MN
Tue Jul 20, 2010
If you are renting, and it goes into foreclosure, they will probably evict you. You should contact an attorney, and see what your options are.
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Cameron Piper, Agent, Forest Lake, MN
Tue Jul 20, 2010
Dr. B,

Why not ask your brother to catch up on his payments? If he can't or won't and you are willing to take over the mortgages, why not refinance the whole property (paying off the first and second) into your name and be done with your brother and his inability to pay the mortgage?

There are a million different scenarios that will present themselves as you try to work this out but the reality is that because your brother isn't paying, you need to step in and take over to protect your interest. This really is one of those situations where an attorney's review of the current mortgages, and the contract for deed would be invaluable to you as you move ahead.

Cameron Piper
Web Reference:  http://www.campiper.com
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Dr. B, Home Buyer, Bovey, MN
Tue Jul 20, 2010
I have not purchased the property. I have only been renting CD at this point and I can walk away at any given moment. I am just having a hard time finding anything else in my area and I am looking into all of my options. Basically it boils down to he owes more than what the place is worth at this point and has financially been unable to pay his portion. If my business is a "renter" of the property and I have proof of all of that, what would happen if they foreclosed on him. Are they going to evict me? Would they be willing to sell it to me for less?

Thank you for your help.
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Fred Glick, Agent, Mountain View, CA
Tue Jul 20, 2010
Dude...bad move.

The way you bought it, it's all yours.

They have a valid lien and you need to pay them off when the property is sold.

Technically, the loan is due and payable when he transferred the deed because there is a due on sale clause.
Web Reference:  http://fglick.com
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James Gordon…, Agent, Hamilton, OH
Tue Jul 20, 2010
Dr. B the lien that the second holds has to be released to sell the property. In fact the second can forclose on the property if they choose to.
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Aaron Dickin…, Agent, Champlin, MN
Tue Jul 20, 2010
The lien against the property for the 2nd will not go away so the 2nd can still foreclose on it. You want an attorney to help you with your liability - there are many issues here. For example, contract for deeds are required by law to be recorded at the county and based on what you said I don't think that happened.

Talk to a lawyer - it will be money well spent.
Web Reference:  http://www.MNseller.com
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