Two More Sheriffs Sales set for August: Williamson County Commercial Properties

Last week, I wrote about a pending Sheriff’s Sale that I have scheduled for August 3, 2021 on 2137 Maricourt Street, Old Hickory, Tennessee.

A number of you reached out for information on any other sales that I may have pending. Here is information on two Williamson County commercial properties that will be sold at the end of August.

This will be via a Sheriff’s Sale set for August 31, 2021, at 12pm, at the Williamson County Judicial Center, 135 South 4th Avenue, Franklin.

(1) Approximately 2.43 acres, South Carothers Road, Franklin, Tennessee, Map/Parcel No. 079-082.00. This is a wooded lot, immediately next to the Soar Adventure Tower ropes course.

This is an image of the property available from the Williamson County GIS mapping site.

Per the Sale Order, bidding for this tract will start at $51,500.00. The 2020 tax appraisal for this property is $103,000.

(2) Approximately 4.29 acres, Royal Oaks Boulevard, Franklin, Tennessee Map/Parcel 079-023.00. This is also a wooded lot, right off Highway 96, on Royal Oaks Boulevard.

The neighboring property to lot was in the news recently, in the Nashville Post article titled “Franklin apartment property sells for $100M.” In case you’re not a subscriber, my interpretation of the article is that a Los Angeles-based real estate group bought the property immediately next this 4.29 acre lot for One Hundred Million Dollars.

This is an image of the property available from the Williamson County GIS mapping site.

I am not suggesting that this property is worth $100,000,000 (or anywhere close to that number), but, per the Court Order, the opening bid will be $100,000.

Please let me know if you would like additional information on either of these two properties. I am the attorney for the creditor, and, as a result, I will be limited in what information and guidance that I can provide, but I am available to answer questions about the Sheriff’s Sale and the Sheriff’s Sale process. Nothing in this post, of course, is designed to give you legal or factual advice about these sales.

As with all distressed real estate sales, buyer beware, and hire a lawyer.

Homebuyer Beware: Some of the property listings on Zillow are Foreclosures and Sheriff’s Sales

Last year, I had a foreclosure scheduled for a Williamson County property in an “in demand” neighborhood and, somehow, Zillow picked up my Foreclosure Sale Notice and listed my sale on the property’s Zillow page. In April, I wrote a post about the 500 phone calls and emails I received from all over the world, asking about the property.

In fact, I got one today from Detroit.

But, a few minutes later, I got a call about another Zillow listing, this time on a Sheriff’s Sale I’m conducting in August on 2137 Maricourt Street, Old Hickory, Tennessee 37138.

The full Notice of Sheriff’s Sale of Real Property can be found on The Wilson Post’s Public Announcements page. I have no idea how it ended up on Zillow, but anything that generates more potential bidders is good.

As indicated in the Sheriff’s Sale Notice, the property is scheduled for auction at 11:00AM, on August 3, 2021. The Sale Notice contains the terms of sale, including opening bid and the bidding process.

I post here in order provide a quick link to the Notice of Sale, which I’m planning to forward to potential bidders. This should present a great opportunity to a bidder.

In this strong real estate market, there are limited opportunities to find good deals on Middle Tennessee real property. The investors have long figured out foreclosure sales, then they figured out tax sales, and, now, Sheriff’s Sales are the next frontier. Sheriff’s Sales used to be rare–given that the process is fairly complex and confusing (even to lawyers)–but these are becoming more common, given the rise in property values and the unyielding demand for residential real estate.

As Zillow continues to grow into a trusted resource, though, I worry that a typical homebuyer may be lulled into seeing only the upsides of the potential deals listed on Zillow, without fully exploring the risks that distressed asset sales present.

I’m not suggesting that a buyer shouldn’t consider participating in a sheriff’s sale (seriously, please come on August 3), but I am encouraging every caller to educate themselves on the process and to consult with a real estate lawyer in advance.

11 U.S.C. § 363 may solve my Zillow foreclosure nightmare

Last month, I talked about how my phone has been ringing off the hook about a Williamson County foreclosure I had scheduled in late-2020, at 2113 N Berrys Chapel Road, Franklin, Tennessee 37069.

The sale was cancelled when the corporate owner filed a California Chapter 11 bankruptcy, but Zillow nevertheless has me listed as the sales agent and, ever since, I get at least one phone call a day asking about the property.

After getting three calls about it yesterday, I looked up the status of the Bankruptcy Case, and I see that the bankruptcy trustee has a sale contract on the property!

Per the Motion for Approval of Sale of Real Property [Docket 217], the bankruptcy trustee is proposing a sale of the property for $600,000 (more than $175,000 below the Zillow value). A copy of the full Motion can be viewed below.

Under 11 U.S.C. Sec. 363, a bankruptcy trustee can sell non-exempt property of the bankruptcy estate. Here, after payment of all the liens associated with this property, the trustee has determined that this sale will generate proceeds for the benefit of creditors.

If you are reading this and you are one of the hundreds of people who have called me over the past 6 months, don’t despair. Pursuant to Paragraphs 9, 12(g), 14, and 15-17 of the Motion, the trustee will continue to entertain higher offers.

But, please note, any such offers must be presented to the Trustee before the hearing on this Motion on June 14.

A successful sale will fully pay my lender client, but I’m also hopeful that a sale will cause Zillow to remove this property as an active listing and that I’ll stop getting so many phone calls.

While it’s been fun to talk to callers from all over the country about this house and the hot Nashville real estate market, it’s also been a huge waste of my time.

Of course, like any good marketer, I’m making lemons into lemonade…I’m telling all the callers about my upcoming and planned Nashville and Brentwood foreclosures for 2021.

We’ll see if Zillow notices those.

My name got listed as sales agent on Zillow and my phone hasn’t stopped ringing

Last November, I started a bank foreclosure sale on a piece of property in Williamson County, at 2113 N Berrys Chapel Road, Franklin, Tennessee 37069. The foreclosure never happened, because the borrower filed a Chapter 11 Bankruptcy in the Eastern District of California.

When I received the Notice of Bankruptcy Filing, I printed a copy for my file, confirmed on PACER that the Notice was legit, and closed my file. This foreclosure sale is canceled.

In the 3 weeks that the foreclosure was pending, I’d received one or two calls about it.

But, somehow, the property website Zillow picked up my Foreclosure Sale Notice and, not only that, but Zillow has me listed as the sales agent on the property’s Zillow page. My name, address, and phone number (the ONE time I used my cell phone number), all right there online.

Since December, I’ve received probably 4-5 phone calls a week, every week, asking about this property. I’ve received calls from families, from real estate agents, and from property investors. The calls are from local numbers, as well as from far away places as Mississippi, California, Minnesota, and London. They call in the mornings, at night, and on the weekends.

I got a call last night at 8pm. I got one today at 2pm.

At this point, if I get a call from a number that I don’t recognize, I assume it’s somebody calling about “that house in Franklin that you’ve got listed for sale.”

It’s either a testament to the reach of Zillow, or the continued atomic-hot Nashville real estate market.

The people are always really nice. They also have a lot of questions about bankruptcy, when I’ll be foreclosing on this house again, and whether I have other houses I can sell to them.

Sometimes they’ll complain to me about the real estate market, about how expensive everything is and how hard it is to find a deal. Occasionally, they ask about bankruptcy and foreclosures, and, honestly, it’s easier to explain what the automatic stay is and how Chapter 11 works than to try to cut the calls short.

I’ve asked Zillow to remove my name and phone number, to no avail.

So, at this point, I propose this: If any of you are real estate agents and need “new customer leads,” please let me know.

And, finally, if you are reading this after googling “2113 N Berrys Chapel Road, Franklin, Tennessee 37069” and you are interested in buying it, here’s what I have to say:

The sale has been cancelled as a result of the borrower filing bankruptcy. A new sale date has not been set and will not be set in the foreseeable future. Yeah, you know those California judges. No, I don’t know if the kitchen appliances in the pictures are still there. No, I don’t have the keys; I just represent the bank foreclosing on the property.

And, yes, I agree. The real estate market in Nashville is insane.

Tennessee is set to increase homestead exemption in 2021

The Tennessee Legislature is, again, considering debtor-friendly changes to the homestead exemption statute.

The one most likely to pass is House Bill 1185, which seeks to increase Tennessee’s homestead exemption from the existing $5,000 to $35,000 for single homeowners and from $7,500 to $52,500 for jointly owned property.

Before you complain too much about that proposal, consider Senate Bill 566, which provides an unlimited exemption for a judgment debtor’s residential real property (and, after the debtor’s death, it passes to the heirs).

Similar proposals were made in 2019, in 2020, and also in 2012 (and a number of times in between). So far, all such efforts have failed, but I believe this is the year that the Tennessee homestead exemption is increased.

Back in 2019, I talked about the importance of exemptions for debtors, since exemptions can preserve and protect a basic necessity level of assets for debtors (picture the clothes on their back, a few thousand dollars in the bank, a car, tools).

As I wrote in 2019, though, “if this new law passes, the downfallen debtor can keep 100% of the equity in his $750,000 house entirely out of the reach of creditors.” I then said:

Wait a second. Is this law designed to protect downtrodden debtors seeking a fresh start in life (who very probably do not have high value real property at all) or, maybe, is it designed to protect high income individuals whose businesses fail?

Because that’s all this proposed law does. It grants fairly absolute protection to the high value real property owned by judgment debtors in Tennessee, and all the garnishments, levies, liens, and bankruptcies will never touch a penny of that equity.

I feel the same way about these new proposals. If we’re talking about protecting the working poor and preserving the necessities of life from garnishment, let’s start somewhere other than $750k of equity in a mansion. Let’s talk about debt relief measures, eviction support, access to justice, etc.

But, these new laws aren’t about basic necessities of life for poor people. Most poor people don’t live in lien-free mansions. Instead, these new measures are being lobbied for by the construction industry.

These are bad proposals. Unless you’re a debtors with big, lien-free McMansion. Then, sure, it’s a great new law.

Is a foreclosure during a global pandemic an "irregular" and invalid sale? (Maybe)

During the coronavirus shut-down, there has been a lot of talk about there being no evictions in Davidson County, based on the Sheriff’s announcement that the Sheriff will not be serving non-essential service of process for the foreseeable future.

But, keep in mind, that announcement doesn’t stop landlord from using a private process server to serve the process.

In fact, the most critical obstacle to detainer proceedings is that the General Sessions Judges have cancelled court hearings through April 10. If there’s no court, then there’s no judgments for possession.

What about foreclosures?

Tennessee is a non-judicial foreclosure sale, so a foreclosing lender doesn’t need a court date, a judge’s approval, or an open courthouse. When they talk about a foreclosure “on the courthouse steps,” they are being literal.

So, as a practical matter, foreclosures can still take place in Tennessee over the next few weeks.

But, is a creditor wise to continue a foreclosure sale to a more stable time? Probably.

That’s because Tenn. Code Ann. §  35-5-118 allows courts to scrutinize the mechanics of a specific foreclosure, with an emphasis on whether a sale is “irregular.”

As I discussed in a blog post last year, pursuant to the Tennessee Supreme Court in Holt v. Citizens Central Bank, 688 S.W.2d 414 (Tenn. 1984), a conscience-shocking foreclosure sale price standing alone, absent some irregularity in the foreclosure sale, is not sufficient grounds for setting aside a lawful foreclosure sale.

What else did Holt say? “If a foreclosure sale is legally held, conducted and consummated, there must be some evidence of irregularity, misconduct, fraud, or unfairness on the part of the trustee or the mortgagee that caused or contributed to an inadequate price, for a court of equity to set aside the sale. ”

So, there remains a question: If a foreclosure sale occurs when the country is facing unprecedented restrictions in public interaction, when we are under orders from local government to “stay home,” is this an irregular sale? Did the unique conditions chill the attendance of competitive bidders?

These are unprecedented times, but we know that the economy is going to take a hard hit and issues like this are going to be litigated. A lender foreclosing on somebody’s business or home in this crazy time may be opening itself up to scrutiny and, yes, a legal challenge.

This would be a great time to continue a sale to a more stable sale date, which is expressly allowed under Tenn. Code Ann. § 35-5-101(f).

Remember: Detainer Appeals without the possessory bond are still valid appeals

Posting the proper bond in an eviction appeal in Tennessee is confusing and, sometimes, very expensive. Remember, though, if a landlord is granted an eviction judgment, the tenant can still have a valid appeal, even if the tenant doesn’t post the possessory bond required by Tenn. Code Ann. § 29-18-130(b)(2).

I thought this issue was settled–I was blogging about it 5 years ago–but it keeps coming up in circuit courts across Tennessee.

The Tennessee Court of Appeals issued an opinion yesterday, affirming this line of decisions, in Thomas v. Millen, W2019-00086-COA-R3-CV (Tenn. Ct. App., Dec. 19, 2019). This case cited the Court’s own recent, similar opinion at Belgravia Square, LLC v. White, No. W2018-02196-COA-R3-CV, 2019 WL 5837589 (Tenn. Ct. App. Nov. 7, 2019).

Long story short, the possessory bond is not jurisdictional, meaning the circuit court has jurisdiction to consider the issues, and an appeal remains valid despite the failure to post the § 29-18-130(b)(2) bond.

As a practical matter, most eviction appeals will die once the tenant loses the right to possession. But, not all. In that situation, the tenant could be dispossessed of the property, but the tenant can still challenge the landlord’s rights and, if successful, seek monetary damages against the landlord if the tenant wins.

That type of fight does happen. I’ve had an opposing party / tenant lose in Sessions, appeal to Circuit, lose possession in Circuit, but continue fighting my matter…all the way to the Supreme Court. The United States Supreme Court.

New Tennessee Court of Appeals decision provides advice for foreclosures of real property developments

A new opinion from the Tennessee Court of Appeals provides valuable guidance to attorneys foreclosing on commercial properties.

The matter is Tennessee Funding, LLC. v. William Worley (No. M2019-01099- COA-R-CV, Tenn. Ct. App. Nov. 26, 2019), and the issue was whether a foreclosing lender took ownership of the contract rights associated with the real property–specifically, whether the foreclosure sale of the entire residential development transfer ownership of the “developer’s” or “declarant’s” rights of the property.

The actual issue was more nuanced than that and, trust me, I know (I represented the prevailing party in both the trial and appellate courts). The full opinion can be found here.

For purposes of this blog post, I won’t bore you with the deep analysis, but here are the main takeaways from yesterday’s decision:

  • In many development loan/construction loan transactions, the lender will be granted both a lien on the real property and a UCC lien on all the “other stuff” associated with the development project.
  • A real property foreclosure pursuant to the Deed of Trust and Tenn. Code Ann. § 35-5-101, et. seq., transfers to the foreclosure buyer all of the dirt.
  • The real property foreclosure does not transfer ownership of all the “other stuff,” including contract rights associated with the development.
  • These contract rights can include plans, drawings, and, yes, developer’s rights under a Master Deed or Declarations (i.e. the right to manage the development/developed property).
  • The rights are personal property, and those rights must be transferred by a creditor’s UCC Sale under Article 9, including Tenn. Code Ann. § 47-9-610.

Ultimately, that was the critical factor in this case–that the foreclosing lender did a dual sale–a foreclosure under the Deed of Trust to purchase the dirt and a UCC sale under the Security Agreement to purchase the personal property.

Keep this case in mind the next time you represent a creditor contemplating a foreclosure on a property development. You may not be doing your job if you only foreclose on the land.

How to Get Rich in Distressed Assets in Nashville? (You probably won’t like my answer)

In a strong economy like Nashville-2019, I get lots of calls from people looking for “good deals” on real estate.

First, I tell them to buy a time machine that will take them back to 2010.

Then, I commiserate with them about all the awesome deals that I watched other people pounce on over the last 7 years (with, of course, a quick reminder about all the awful deals that brought people to financial ruin in the 7 years before that).

After all that, I get serious and talk to them about buying distressed real estate, and all the forms and forums where that can happen. Bankruptcy Sales. Foreclosures. Sheriff’s Sales. Tax Sales.

It’s, literally, a path full of misery and heartbreak, but it’s probably the only realm in present-day Nashville where you can truly get a good deal.

And part of the reason that there’s so much upside is that there’s so much risk in these types of sales. There’s no way to avoid that risk, and, at best, your goal is to simply mitigate that risk.

TL;DR: You have to know what you’re doing. Otherwise, you’re buying your dream house for pennies on the dollar, only to learn that you’re not getting what you thought you were.

I recently taught a CLE for OutkickCLE on distressed buying, and I’ll post that video link here when it goes live. In the meantime, I’ll be posting snippets from my CLE materials here. Stay tuned.

Foreclosure Buyer Buys a Billion Dollar Property for $100k! (Sort of.)

If you’re looking to get rich off foreclosures, let me tell you about the guy in California who bought a billion dollar property for $100k…. 

I’m talking about this New York Times story, subtitled: “Did someone really walk into an auction and buy the priciest piece of real estate in California for $100,000? Well, yes and no.

5d5e699fadbcf8151123d244-750-563If you’ve dealt with foreclosures, then you’ve heard the story about the guy who happened to walk past the courthouse foreclosure with no bidders, knew the property being sold, bid $100 for the house, and won a house. Great story, right?

The reason the New York Times is talking about this famous 157-acre plot of land in California is that it was initially listed for sale for one billion dollars and then was cut to a more reasonable $650 million asking price. Jeff Bezos, Tom Cruise, and Brad Pitt have all kicked the tires on buying this property.

So, on August 20, when the the property sold at a foreclosure sale for the high bid of a mere $100,000, people noticed.

What a steal, right?  Not so fast, the story continues:

That seemingly bargain-basement price came with a condition: that the estate forgive the $200 million loan. Any other buyer would have had to pay at least $200 million at auction to cover the debt.

This reminds me of my “buyer-beware” foreclosure post from 2010.

As a general rule, foreclosure sales wipe out liens behind the foreclosing instrument, but they are subject to any senior liens (liens recorded before the lien being foreclosed).

With this in mind, always remember that a foreclosure sale will be subject to senior liens.

For that California property discussed above, the $100,000 bidder was buying the property, but subject to that $200 million lien.

To be clear, the buyer didn’t become obligated or assume that debt; it just means that the first mortgage still has a valid claim and lien on the property, and the foreclosure bidder had better make arrangements to pay off that debt…or the property gets foreclosed a second time.

But, on paper, it’s still a pretty good deal. I mean, the buyer can frantically try to sell it and, if they can sell it for half of the last list price (i.e. $325,000,000), that’s still a great day at the office.