When a homeowner is in foreclosure, it is likely that the homeowner will receive solicitations from "investors" who will offer money for the homeowner's deed. In the typical situation where the mortgage debt exceeds the value of the house, an investor may approach the homeowner early in the foreclosure process and offer the homeowner a few thousand dollars in exchange for the deed and keys to the house. Typically the homeowner is unaware of how long the foreclosure process is and out of fear of being evicted by the bank, the homeowner may agree in haste to convey the deed for a few thousand dollars. The investor is likely inclinded to rent out the property and contest the foreclosure to delay the action as long as possible. The investor will likely be made whole for the few thousand dollars paid to the homeowner once the investor receives from the tenant two months' deposit and one month's rent. All rent after that is pure profit. Since the investor is not paying real estate taxes, the investor is earning pure profit. Depending on the county, the investor could collect rent for up to three years! Other times, the mortgage debt may be significantly less than the value of the property, but the homeowner has no equity due to various judgments. In this situation, the investor may again approach the homeowner early in the foreclosure process and offer a few thousand dollars to the homeowner in exchange for the deed to the property. The investor will do this if he/she feels that it is highly likely that the property will sell at the foreclosure auction for more than what is owed the foreclosing bank, and if it does, the difference between the amount owed the bank and the selling price is deemed surplus money, which will be paid to all subsequest lienors who petition for all or a share of the surplus money. If the subsequent lienors do not petition or file claim for thesurplus monies then they will be barred after the proceeding is completed. The homeowner can petition for surplus money but in this case, the investor steps into the shoes of the homeowner and may petition for all or a share of the surplus money. If the investor petitions for surplus money and the subsequent lienors fail to file claim then the investor could be entitled to all the surplus money. There are, however, many nuances to these scenarios that are beyond this post, and the real point of this post is to alert homeowners to always speak with an experienced foreclosure attorney before agreeing to transfer a deed to property in foreclosure.
Arnold M. Bottalico is an experienced Long Island, NY foreclosure attorney with over 25 years of experience, and he welcomes your questions and comments.