While the number of residential properties facing potential foreclosure has decreased somewhat in Washington State in recent years, there are still quite a few owners who remain in financial trouble. Some real estate experts say that this is particularly true for over-leveraged owners of multi-family residential properties.
Some financial advisers say that this might be a great time for savvy investors to pick up “distressed” multi-family properties in the greater Tacoma area. Any potential investor considering a property that may be in “pre-foreclosure” should recognize that there are a host of legal and business-related matters that need attention. Here are four tips in acquiring multi-family residential property during the pre-foreclosure phase.
Tip One: Get a Copy of the Notice of Default
Generally speaking, a property is considered in “pre-foreclosure” status when the current owner has fallen at least 60 days behind in the monthly mortgage payments and has received some sort of default notice from the lienholder. If the owner recognizes that clearing the default will be difficult or impossible, that owner often enlists the services of real estate professionals to aid in the sale of the property. Since the default notice generally provides an important timetable, getting access to a copy if important.
Tip Two: Determine if There Are Problematic Title Issues
With virtually any multi-family residential property, there can be important issues related to the title of the property that must be addressed. For example, have property taxes and assessments been paid? If not, do they constitute a lien on the property? Are there any other liens against the property? If the property is leased, what is the legal status of the lease or leases? Prospective buyers should recognize that acquiring the property through the foreclosure process might provide some title protections that are not available in a straight or short sale without actual foreclosure. Getting appropriate legal counsel here is an absolute must.
Tip Three: Get a Proper Inspection of the Property
As just noted, it is important to acquire the property only if one can get a clear title. It is also crucial that any prospective buyer have a clear understanding about the structural integrity of the property. Will a new owner face expensive repair costs? Do maintenance issues exist? Recognize that if an owner has fallen behind in mortgage payments, that same owner has almost always deferred maintenance issues. Hire a qualified inspector.
Tip Four: Recognize that a Bankruptcy Filing Can Put a Kink in Your Plans
In many respects, a potential purchaser of trouble property walks a tightrope. On the one hand, one needs to be assured of a clear title and also that the prospective buyer is aware of any physical problems or defects with the structure. Getting that information takes time and costs money. On the other hand, competing interests can sometimes arise. If you think it’s a good deal, chances are someone else will as well. In such instances, the owner may determine that its interests are best served by filing bankruptcy. Such a filing can put a kink in your plans, although they need not be torpedoed altogether.
Effective Legal Counsel Can Assist You With Prospective Properties
Because of the complexity of acquiring multi-family residential property – whether in a pre-foreclosure arrangement, an actual foreclosure proceeding, or even through an active bankruptcy case – having experienced and knowledgeable legal counsel is a must. The attorneys at Blado Kiger Bolan, P.S. have years of combined experience handling a full range of real estate law. Our depth of knowledge allows us to provide our clients with superior representation. We work collaboratively – sharing strategies, ideas, and experience. Our team of attorneys and staff is big enough to handle your matter, yet we are small enough to provide you with the most personal legal service possible. We pride ourselves on designing the simplest, most effective solution for your legal issue. For assistance with any sort of real estate issue, contact us on the web or call our office at 253-272-2997.