I am in a pickle. My husband and I sold a ranch to my Brother In Law about 7 years ago. We carried back a portion of the financing, and it's not going well. I'd like to share this (long) story and get some input from ya'll.
Some history-- the sale was during the "boom" years, and we had several interested parties in this farm, but the BIL wanted it badly. We sold it to him at a slightly discounted price of 850K. We took 500K down, and carried the paper on roughly 350K, @ 7 percent, which was payable monthly, amortized over 30 years, payable in 5. BIL and his wife sold a couple of properties (also at peak prices) for the down payment, and have great, well paying county jobs. But they are not Mustachians, and concurrently bought a 1MM ranch home in need of TLC, and seem to always be stretched in the financial department. But this bad financial acumen was not crystal clear at the time of the sale, which seemed like a good idea at the time <insert face punch>.
So, as we all know, the values of property have still not rebounded from the boom, and this big ranch will not have many takers in the best of times. BIL is not the greatest rancher, so crop production is down from when we had it. In other words, it isn't worth nearly as much now as it was when we sold it, and is more likely worth closer to what he owes than what he paid. We tried to sell the note, but the numbers didn't work.
The BIL is late basically every month, and has been since nearly the inception of the loan. For instance, he currently owes us for May, June, July, August, and late fees amounting to $600. If he continues at this rate, it will take him 30 years to pay it off. And we would essentially be dealing with this for decades. I know now just how terrible an idea this was/is, but it's a tricky situation to extricate from, not only because he is family, but my step son lives on the property as a ranch manager, too. BIL has just retired with 100% pay, and it's harvest season...the money should be flowing... so the writing on the wall is even more clear than before.. we are very low on his list!
A couple of years ago, I switched the payment processing to a contract servicer, and this was a great idea, because the service now keeps track of the daily amortization, sends him a coupon book, allows for phone payments, etc. It also insures that I get interest on the back due monies, and provided a neutral third party buffer between us and them. BIL and his wife stopped returning my calls or emails years ago, so relations have been strained for a long time, but we're civil at family gatherings, etc.
Twice we've extended the loan by 12 months... which was the main reason he has caught up on payments at least once in a 12 month period. It's been our strongest leverage. We also upped the late payment fee to $150 on the last go-round. I threatened to raise the interest rate, but didn't end up doing it. I think his credit is shot, and doubt he'd qualify for a loan. It appears that a combination of bad luck (buying at the top of the market) and terrible financial habits has the BIL in poor fiscal shape. A big property like that either needs a farm ( or commercial) loan or a land loan, both are more difficult to obtain than a conventional home loan.
So, I am willing to foreclose on the SOB and sell the property for what ever we can get for it (likely about the same or less than he owes us in its current condition). I don't want this headache, and the numbers are too big-- and interfering too much with our FI plans--for me to be happy just letting it work out however it does. Obviously, DH is not pleased with the foreclosure idea, but is tired of hearing me complain about it. He feels that his brother will pay eventually, and doesn't want to take a loss on the sale. DH is an easygoing guy and feels like we've got enough $$ rolling in that this won't make or break us. Also, he is adamant about not wanting to go back and fix up that farm to make it ready to sell. If the sale took a long time, the crop would die, the place could be vandalized, etc. So, as near as I can tell, for many reasons the foreclosure idea is not really an option.
What would you do if you were walking a mile in my moccasins?
