I am five years into a 10 year mortgage with a guy that I sold a house to. He’s only been late once or twice. Maybe three years ago, he went to rehab for 30 days and a friend or family member of his paid his mortgage that month. This month, he missed his mortgage payment. His insurance has also lapsed. I think he has vacated the house, because he always kept the yard really nice and now it is overgrowing. His phone number has also been disconnected.

So now, what do we do?

This mortgage was gravy from day one. I had already made my money off the house holding it for a number of years as a rental.

My main concern at the moment is the insurance, so I’m not sure what to do there.

Other than that, I have several options that I want to bounce off of the crew here and see what people think.

Number one try to track him down and hopefully get back on track.

Another option is if I can get a hold of him and he needs to sell the house, he can sell it back to me for a quit claim deed and I’ll give him some cash and send them on his way.

Another option, I can check and see if he has been keeping up on his taxes, I don’t know if he has or not. If he hasn’t, I might be able to buy it back in the fall.

Or if somebody else buys it back, my mortgage will still stand.

Or lastly, I can start the foreclosure process once the timeline allows me to do that.

I’m in no hurry to get any of this stuff done, so I can definitely turn it into a good learning experience.

I think I'd simply start the foreclosure action and get the clock running. If he's interested in continuing to pay the mortgage, he'll contact you. If he wants to do a deed in lieu to stop it, he has that opportunity also but at least the ball is rolling down the hill no matter what. At the sheriff's sale, if it gets that far, you'll be the high bidder.

Does your note and mortgage allow for forced-place insurance that would add to the balance due? If so, get it in place. If not, talk to your insurance agent about how you can get insurance on the place. No insurance is your biggest short-term risk.

I would try to track the guy down and get him to deed it back assuming he has not done anything else that would impact title.

Have you considered doing a wellness check?

That too bad that this property isn't in a land trust. Beneficial interest in a land trust is considered personal property and not real property. What is the difference? Instead of $7,000 foreclosure action, you are just dealing with small claims court.

Get insurance on it immediately.

I would go by there and take a look. You don't say anything about the guy being dangerous, so go and knock on the door and peek in the windows. Ask his neighbors. Do you have contact information for the friend that paid his mortgage that one time?

If you can't find him to work something out then get the foreclosure started, but it seems like you should make an effort to contact him first.

In TX, we usually (a) attempt physical service to the other party, but also (b) give notice by publishing in the local paper. Certain boilerplate, repeated for a certain number of times over a certain length of time. (All our papers are weeklies in my area, so I don't know how it would translate to an area with dailies.)

On the few that I have like that I check that the taxes are paid twice a year.

If he missed his payment and his insurance lapsed maybe he is in rehab again? I had a tenant that did that. He actually did it twice. His family didn't know about it and they were concerned as well.

The first time I worked with him, the second time I filed eviction.

But if you don't want the place back maybe a little snooping is in order. I know you are playing bank and as the mortgager you don't do things like that, but it is still your house in the end.

The next place I sell like that I will put in a trust as Ray recommends.

Depends on whether you want out easily or to work at it and make some money.

The easy way out is to sell the note. I bet I get two cards a week from people wanting to buy the notes I am carrying. That said, they usually want to buy at a discount, so it is easy out but not the best financial decision.

I quit doing rent to own type deals. Too many problems.

Now, if I am inclined, I just do an option with a 6 month window to either exercise the option or it automatically expires. Never agree to credit any of the option money or any part of the rent payments toward the purchase price as some judges will declare that this gives them an equitable interest and then you must foreclose on them, costing you lots and lots time.

I had a super ahhh huh moment at the convention for skirting RTO conversations. When I was doing them, even with screening the crap out of the folks upfront, only about one out of three would move ahead.

So when someone wants a RTO, I let them know there are two requirements. First one, you rent off of me at least one year before you are considered for a RTO. The second point, they will be buying the right of first refusal. This is different than an option or an owner finance. It lets them know they can have some level of stability, but the risk is strictly on them- not me.