I was checking out the listing for that DeCaro - financed spec house at 12 Byfield, currently listed at $11,000,000, and boy is someone in trouble. The floors are unfinished, as is the interior painting (there’s a $93,000 mechanic’s lien on the property by a painting contractor, but that must have been for the outside. No appliances and goodness knows what else is needed – the pictures don’t tell the story.
The first mortgage is for $4.8 million, owed to Bank USA and probably subject to some kind of defense by the builder but, for now, that’s the number. There’s a second mortgage owed to the builder’s own mortgage company in the amount of $2.5 million and due June 1st but hey – it’s his company, so maybe he’ll cut himself some slack. $46,000 in property taxes owed, $23,000 in sewer taxes and that’s from awhile ago – I’m sure the figure has grown.
So is this place worth $11 million, and more important, can the builder/seller get that much? I doubt it – the highest previous sale on Byfield is $5.5 million and that buyer was under the influence of baked banana peel. This house is unfinished and its builder is bankrupt, so punch lists and warranties are probably not going to happen. The original lender is gone and the bank that took its place doubtless paid pennies on the dollar for this loan. I think I’d approach the bank directly, were a client interested in this property, and see how much of a discount it would give on that face amount of $4.8. I’d offer the mechanic’s lienor maybe ten or fifteen cents on the dollar, pay the town and finish the job. All in, maybe $4.5? That would be a decent deal, if you like this sort of house.
Call Tom Hanks. He and his wife have some experience with this sort of situation and might be willing to take a flier. You never know until you try…
http://www.businessweek.com/ap/financialnews/D9NELQDG0.htm
What if the Mechanics lien did not accept your offer. If they held out, could you get title?
Treepart – a mechanic’s lien must be foreclosed on (or the process started) within, I believe, a year after filing. So if you’re owed $100,000, can you afford to foreclose on a house with a $5 million mortgage that you’d have to take out? Usually the answer is “no”, which is why the subcontractor is usually so reasonable. But to answer your question directly, yes, you can get title, subject to the lien.