Good morning;
Assume you find someone going through foreclosure and their house is almost ready to go to auction. How do you use a contract for deed to seize the property before foreclosure? Should it only be done when there is a certain percentage of equity in the property? Thank you.

John

Welcome to AMHD. I am not certain I understand your question. If the property is almost ready to go to auction, that would indicate the mortgagor/seller is in arrears, right? Are you attempting to purchase the property? I'm confused by your use of the word, "seize". I believe the mortgagee must approve of this arrangement and would want the installments under the promissory note and expenses incurred for auction brought current before removing the property from auction.

How do you use a contract for deed to seize the property before foreclosure?

The answer is you don't. You have no standing with the property and cannot "seize" anything.

The only thing you can do with a property in foreclosure is make an offer to the owner to buy it. If your offer is enough to pay the outstanding balance on the mortgage, the property owner may sell to you.

Another option is to see if the lender will assign the mortgage to you. You would then pay the arrears and, maybe, a small amount to the owner to transfer title to you.

You could enter a contract for deed with the owner, but the only way ehat could work is if 1) your downpayment is enough to bring the mortgage upt to date and 2) your contrac payment is enough to cover the mortgage payment.

My question was paraphrased too loosely. Before the bank has an auction, is it possible to transfer title to the property assuming anything in arrears is paid, under a contract for deed agreement so there is actually no "sale"? This would enable the new titleholder to rent it out hopefully to cover the mortgage payments or sell it. Is that more clearly stated?

I believe I answered this with my first response. At any time prior to the foreclosure, the mortgage can be brought up to date to forestall the foreclosure. Someone seeking to purchase the property under a contract for deed, would need to pay enough up front to bring the account up to date.

Since, in a contract for deed, there is no change in title, the mortgage lender may need to be satisified the loan won't fall into arrears again. The buyer would have to make sure that payments are made to the mortgage holder.

It is possible to transfer title to property before an auction if the note and mortgage do not include a 'due on sale' clause. I don't believe a contract for deed will make the recipient a 'new titleholder', but I don't know the correct word for that in any event.