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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Re: Unconscionable advantage dilemma Posted by Ron M on September 28, 2001 at 3:44 PM In Reply to: Re: Unconscionable advantage dilemma posted by Ward-CA- on September 28, 2001 at 2:15 PM Ward, The way I understand this body of the law is this...it's designed to offer a remedy in the event someone takes advantage of someones plight and (for lack of a better word) steals their equity. I can see a lawyer successfully argue for a recission of the transaction if say a smart, sophisticated real estate 'monster' such as yourself were to pocket 99% of the leftover equity from a slow and feeble little old lady. (BTW, just kidding about the 'monster' bit, I'm still laughing inside about that remark you made at your recent seminar about whether we, as foreclosure investors, would want to compete against a bunch of savvy, deep pocketed monsters, like you.) Anyway, I'm glad you won your case because you didn't do anything wrong. You didn't take unconscionable advantage of anybody. It's funny how some lawyers attempt to twist, distort and even misapply the law to support their position. The reason I started this thread because I can envision a scenario where I negotiate an extremely good deal for myself (with the trustor- pre sale) and perhaps a year and a half down the road getting a letter from an attorney threatening a suit unless I give back some of the equity I bargained for. I suppose I shouldn't worry about it because it probably rarely happens anyway... TIA Ron M : : How's this. : : 100K in equity...you give trustor 10K to quitclaim property to you. You reinstate loan, pay back taxes (say 10K) and keep 80K in equity for yourself. Is that unconcionable in your opinion? (Not that I plan on putting deals like these together, should I ever run across one, but want to get an idea of where it is one crosses the line.) : : Tia : : Ron M : : : =•=•=•=•=•=•=•=•=•=•=•=•=• : Ron, what is or isn’t unconscionable isn’t necessarily quantifiable. However most people would think, in the area of dealing directly with an owner before the foreclosure sale, that a 50/50 split of the owner’s NET equity is fair. : But if you ask them if they had bid at the trustee’s sale and got title to the property with a possible 100K profit while the foreclosed owner received nothing that that’s OK since the bidder played by the rules and only bid what was necessary to be the highest bidder. : I think a bidder who would way overbid at a foreclosure sale, just to be sure that the foreclosing owner would get part or all of the overbid, would be thought insane by most people. : Here’s a real life example. I once bought a house for a penny more than its $15,000 opening bid. I spent another $30K in fixing it up and another $30K in legal fees with a title company that didn’t want to eat the loss of a wiped out junior loan for about $128K. : The title company lost their battle with me and got nothing but a big legal bill for their efforts and the foreclosed owner received zilch. I resold the house for about $154K. So I made about $75K on my total outlay of about $75K. What do you think, should I have sent a check to the wiped out, foreclosed owner? The title company lawyer argued to the Court that to allow me to win meant that I would be making an “unconscionable profit”. Follow Ups: Post a Followup: Name : E-Mail : Subject : Comments: : Ward, : The way I understand this body of the law is this...it's designed to offer a remedy in the event someone takes advantage of someones plight and (for lack of a better word) steals their equity. I can see a lawyer successfully argue for a recission of the transaction if say a smart, sophisticated real estate 'monster' such as yourself were to pocket 99% of the leftover equity from a slow and feeble little old lady. (BTW, just kidding about the 'monster' bit, I'm still laughing inside about that remark you made at your recent seminar about whether we, as foreclosure investors, would want to compete against a bunch of savvy, deep pocketed monsters, like you.) : Anyway, I'm glad you won your case because you didn't do anything wrong. You didn't take unconscionable advantage of anybody. It's funny how some lawyers attempt to twist, distort and even misapply the law to support their position. : The reason I started this thread because I can envision a scenario where I negotiate an extremely good deal for myself (with the trustor- pre sale) and perhaps a year and a half down the road getting a letter from an attorney threatening a suit unless I give back some of the equity I bargained for. I suppose I shouldn't worry about it because it probably rarely happens anyway... : TIA : Ron M : : : : How's this. : : : 100K in equity...you give trustor 10K to quitclaim property to you. You reinstate loan, pay back taxes (say 10K) and keep 80K in equity for yourself. Is that unconcionable in your opinion? (Not that I plan on putting deals like these together, should I ever run across one, but want to get an idea of where it is one crosses the line.) : : : Tia : : : Ron M : : : : =•=•=•=•=•=•=•=•=•=•=•=•=• : : Ron, what is or isn’t unconscionable isn’t necessarily quantifiable. However most people would think, in the area of dealing directly with an owner before the foreclosure sale, that a 50/50 split of the owner’s NET equity is fair. : : But if you ask them if they had bid at the trustee’s sale and got title to the property with a possible 100K profit while the foreclosed owner received nothing that that’s OK since the bidder played by the rules and only bid what was necessary to be the highest bidder. : : I think a bidder who would way overbid at a foreclosure sale, just to be sure that the foreclosing owner would get part or all of the overbid, would be thought insane by most people. : : Here’s a real life example. I once bought a house for a penny more than its $15,000 opening bid. I spent another $30K in fixing it up and another $30K in legal fees with a title company that didn’t want to eat the loss of a wiped out junior loan for about $128K. : : The title company lost their battle with me and got nothing but a big legal bill for their efforts and the foreclosed owner received zilch. I resold the house for about $154K. So I made about $75K on my total outlay of about $75K. What do you think, should I have sent a check to the wiped out, foreclosed owner? The title company lawyer argued to the Court that to allow me to win meant that I would be making an “unconscionable profit”. Optional Link URL: Link Title: Optional Image URL: [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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