29a Venture Concept

Venture Concept

1. Venture Opportunity Description

 Throughout economic history in the United States, we have seen major recessionary gaps and major inflationary gaps. 

After a borrower defaults on mortgage payments, the lender (or the subsequent loan owner) will likely foreclose. Most foreclosures end in an auction where the property is sold to a new owner.

During the foreclosure crisis, foreclosure sales frequently resulted with real estate sold well above of the opening bid. Depending on state law and the circumstances, a foreclosure is either judicial or nonjudicial. At the end of the process, a trustee or an officer of the court, like the sheriff, will typically conduct a foreclosure sale. 

A foreclosure sale results in excess proceeds, the lender doesn’t get to keep that money. The lender is entitled to an amount that’s sufficient to pay off the outstanding balance of the loan plus the costs associated with the foreclosure and sale—but no more. Generally, the foreclosed borrower is entitled to the extra money.

2. Concept:

Let’s illustrate this with an example:

Suppose you own a property worth $100,000.

One day – you decide (for whatever reason) to stop paying your property taxes or mortgage.

Eventually, a couple of years go by and the county treasurer/clerk of court comes in and seizes your property for non-payment of property taxes or in case of mortgage bank send the property to a public auction sale. At the time of foreclosure, you owed somewhere of $58,000 of taxes and mortgage and late fees and etc. A few months later – the county brings this property to their sale – where they sell your property (along with dozens of other delinquent properties) to the highest bidder – all in an effort to recoup their lost tax revenue/mortgage on each parcel of real estate.

Since you owed $58,000 on your property at the time of foreclosure, the county decides to start the bidding process at $58,000 (because this is the minimum they will need in order to recoup the money that you owed them).

But here’s the thing-    your property is easily worth $100,000 (and most of the investors bidding on your property are fully aware of this). In many cases, properties liked yours will receive bids far beyond the amount  owed. It wouldn’t be uncommon for a property like yours to actually sell at auction for say – $80,000. But get this – the lien holder only needed $58,000 out of this property. The margin between the $58,000 they needed and the $80,000 they got is known as “excess proceeds” (i.e. – or at “tax sales overage”, “overbid”, “surplus”, etc). Many states throughout the U.S. have statutes that prohibit the county from keeping the excess payment for these properties.

3. Innovation/Opportunity

This is where the “secret business opportunity” exists in collecting excess proceeds. The county has rules in place where these excess proceeds can be claimed by their rightful owner (prior owner/their heirs or representatives  – usually for a designated period of time (which varies from state to state).

Typically, if a sale has excess proceeds, the trustee or other sale officer has to send a notice to the foreclosed homeowner’s last known address. But the last known address is usually the foreclosed property. Because most people don’t realize they’re due any excess proceeds, they tend to vacate a foreclosed property without leaving a forwarding address. So, it’s difficult for a trustee or other sale officer to find foreclosed homeowners after a sale. Because a sale might generate excess proceeds, it’s a good idea to track the process. I should take note of the sale date, which will be included in the foreclosure documents I receive. After the auction, contact the trustee or officer that sold the property. Now with the prior owners lost or moved, applying right techniques  of locations of those people there is a great chance to find and contact them. With proper agreements I can become their representative and control and initiate claiming funds that I further will either split or be flat compensated from. Basically on this step I need at least one employe who would be a professional negotiator, another employee/independent contractor who would do digging and location, another possible independent I will be using is an attorney who will be prepping contracts/agreements, but as long as I have it all lined up and have all forms, I will barely need one except for consultation in some extraordinary cases.  And of course I need myself, who will manager whole process, obtain surplus fund lists from different county and conduct docket research. Further I may substitute me and hire a manager. 

Feedback

I have received a positive feedback from my colleagues. One of them wants to partner up with me and cooperate in a process. The entire venture as a whole is complicated and the tiers probably should be implemented post launch. I was also told to execute new ideas in small steps with introductions to what changes would be made.