I find it rather ironic after going through foreclosure on my own home, I am now having to foreclose on someone else.

In February 2006 I sold my mobilehome on an installment contract of sale. This is an excellent way to sell your home if you can do afford to do it for several reasons. Just a couple are:
1) You only pay taxes each year on the amount you are actually paid, not the full amount of the sale(of course if it’s your personal residence you would be exempt for a certain amount of your gain. Check with your accountant)
2) It opens the market to many more buyers
3) It can provide a nice income on a monthly basis
4) Generally you can get full price if you offer terms instead of “all cash”

Unfortunately, these transactions don’t always go smoothly and sometimes you have to foreclose to get your property back, which is what is happening to me right now. While this is a “down side” to an installment contract, it’s also an upside in the way that not only have I been paid monthly payments for over 2 years, but if he gets caught up on his payments I win, or if I get my mobile back and move into it I win. While it’s inconvenient, I wouldn’t say it’s really any worse than trying to evict a tenant on a rental and I have recourse if he destroys the property on the way out.

Foreclosing on a mobile home on rented land is much easier and faster than foreclosing on real estate, but the basic red flags of an installment sale are basically the same. When I sold my mobilehome, due to the business I had at the time I hadn’t spent a night in it in four years. I was just throwing money down the drain every month paying the space rent. At the same time my house payments were rising on the adjustable rate mortgage and I couldn’t afford to hold the mobile any longer. I began actively trying to sell it. Along comes Mr. X in December of 2005.

Mr. X just lived a few blocks away, but was splitting with his “significant other”. He wanted to stay in the area because they had a young daughter and he wanted to stay active in her life. Due to paying child support, etc. he couldn’t afford a whole lot and was very familiar with the mobilehome park I was in. He would pay me my full price if I would carry the loan on an installment contract. I was selling the mobilehome “as is” and had priced it substantially below market because I didn’t want to have to mess with repairs. Mr. X was a contractor and figured he’d do the work himself so he wasn’t concerned. The sales price was $169000 and he was offering $25000 down.

Red Flag # 1

When you make decisions based on your need for the money you have a tendency to ignore the red flags. That’s the position I was in and it makes you very vulnerable. The first red flag was when we met for the second time to sign the contracts, he changed the down payment amount from $25000. to $16,900. He said the reason for the change was he needed to have some cash left for fixing up the mobile. I understood that. I figured he was still putting 10% down. I had enough money temporarily for what I needed to do, so I said ok.

Red Flag #2

He started hem-hawing around providing a credit report. He had stated he made approx. $40000. per year and he only had about $800 in debt. I still wanted a credit report. At least I had that much sense. Come to find out he was in a dispute with the IRS. I guess he figured he better tell me before I saw it, and he had a lawyer draw up a letter telling me the IRS would not attach or take the mobile for what Mr. X owed. He even attached parts of the code to show me this was highly unlikely. When I finally got a credit report from Mr. X there was nothing about an IRS lien. While I felt secure about that, it should have sent a red flag that Mr. X wasn’t completely honest, or at least was manipulative.

This is getting to be a rather long story, so I’ll cut off here as these are the two most important red flags to watch out for. Come back for part 2 tomorrow.

Lauri Beamish DRE #00950917

This entry was posted on Thursday, August 6th, 2009 at 6:41 am and is filed under Real Estate Installment Sales, crooks in real estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.