How to Navigate Foreclosures & Save Deals with Legal Expertise
Show summary
In this episode of the Real Estate Pros Podcast, host Micah Johnson interviews Mahmoud Elkhatib, a unique attorney with a background in chemistry and real estate investment. Mahmoud shares his insights on navigating real estate transactions, understanding client pain points, and the importance of community in the real estate industry. He emphasizes the need for creative problem-solving and the value of having an attorney who understands both the legal and practical aspects of real estate deals. The conversation highlights Mahmoud’s approach to helping clients achieve their goals while navigating complex situations.
Key takeaways
- In a sub2 deal, the buyer takes over the seller's existing mortgage payments (e.g., a 4% loan) instead of paying off the loan at current market rates (7-8%), but this requires careful legal structuring around foreclosure, liens, and insurance.
- Mahmoud described a case where a client redeemed a loan and got a deed but still faced a pending foreclosure, another loan, another lien, and no insurance in place—problems that surfaced because the deal was rushed without proper legal review.
- Instead of killing risky deals outright (as conservative attorneys often do), Mahmoud's approach is to find a way to make the deal work so the buyer stays clean and the seller doesn't end up worse off.
- When advising a client in foreclosure with a large water lien in Chicago, Mahmoud's method was to run the full numbers: what's left after paying the bank, paying off liens, paying attorney fees, and paying construction costs, to determine if the deal is actually worth doing.
- In a private lending dispute involving $150,000, Mahmoud drafted a contract with strict penalty terms so the borrower would be squeezed hard if he reneged on repayment terms; the borrower initially refused to sign but paid the lender in full five minutes before foreclosure.
- Illinois is an attorney-closing state, meaning every real estate closing requires an attorney involved, which Mahmoud argues makes it worth hiring one who understands the investment side, not just the legal paperwork.
- Mahmoud's background as a chemist, real estate broker, business owner, and someone who personally went through foreclosure (having his own family's house taken) gives him insight into clients' pain points that purely legal-trained attorneys typically lack.
About Mahmoud Elkhatib
Mahmoud Elkhatib is an attorney based in the Chicagoland area (Northern Illinois) running a law firm that represents buyers, sellers, investors, and people in financial distress. His firm handles real estate transactions, foreclosure defense, building code violation litigation, and consumer actions against banks. Before law, he worked as a chemist in manufacturing, became a real estate broker, and personally went through foreclosure on his family's house, which shapes his approach to client deals.
Listen to the audio
“If you don't have an attorney who understands the nuances... most attorneys, very conservative attorneys, would be like don't do that deal, stay away from it. I'm like no, no, no, no. I understand the benefit of making a deal like this work, now how do we do it.”
Mahmoud Elkhatib
“This is the most expensive thing you're going to buy. Period. Would you have someone operate on your heart or your lungs and ask for the guy that's going to work in the back alley, or the cheapest?”
Mahmoud Elkhatib
“We've been down this hole and we know the way out.”
Mahmoud Elkhatib
Questions answered in this episode
What is a sub2 (subject-to) real estate deal and why is it risky without a good attorney?
In a sub2 deal, the buyer doesn't pay off the seller's mortgage but instead takes over the existing loan payments, often at a lower interest rate (e.g., 4% vs. 7-8%). Mahmoud warns that without an attorney who understands the nuances, buyers can run into problems with pending foreclosures, additional liens, other loans, and missing insurance that weren't disclosed or understood upfront.
Why does Mahmoud Elkhatib say most attorneys aren't suited for creative real estate deals?
He says typical attorneys go from high school to college to law school straight into legal practice without ever running a business, being sued, or experiencing financial distress themselves. Because of this, many conservative attorneys simply advise clients to avoid complicated deals rather than finding a way to structure them to work.
How should an investor evaluate whether a distressed/foreclosure deal is worth doing?
Mahmoud recommends running the full numbers: what you pay the bank, what you pay to clear other liens (like a water lien), what you pay the attorney, and what you pay in construction costs, then comparing that total to the property's value after rehab to see if there's enough profit left to justify the deal.
Is Illinois an attorney-closing state, and does that matter for investors?
Yes, Mahmoud confirms Illinois requires an attorney at every closing. Since investors are already required to use one, he argues it makes sense to choose an attorney who also understands the investment and practical side of deals rather than just someone who processes paperwork.
How did Mahmoud help a private lender recover a $150,000 loan from a borrower who was stalling payment?
Mahmoud drafted a tightly structured contract with strict penalty terms, so that if the borrower missed payments, aggressive collection action would immediately follow. Although the borrower initially refused to sign and threatened to fight it, he paid the lender in full within minutes once he realized the contract would hold him fully accountable.
Resources and links
- The Bow Tie Attorney’s Website
- Foreclosure Defense Law Office’s Website
- The Bow Tie Attorney on Instagram
- EV Law on Facebook
- Mahmoud Elkhatib’s Email: mfaisal@evlawgroup.com
- Client Concierge Team Email: Clients@evlawgroup.com
- Send Contracts To: closings@evlawgroup.com
- Office Phone Number: (312) 775-0980
Full transcript
Mahmoud Elkhatib (Bow Tie) (00:00)
I had a client come to me with a sub two. And if you’re not familiar with sub twos, essentially the the buyer is not buying the property. They’re buying the borrower’s position on the loan. Right.
so instead of actually you buy the property, but then you take over their mortgage payments you’ve got a loan at 4 % versus paying 7 % or 8 % But if you don’t have an attorney who understands the nuances,
And so this particular client just paid a bunch of money to redeem the loan. And now she has a deed and the paperwork was horrendous, but she’s got a deed and she paid off the person’s back mortgage payments. But the foreclosure is still pending.
and there was another loan and there was another lien and you don’t have insurance and like there’s all these things that come up that she wasn’t aware of and so most attorneys like very conservative attorneys would be like don’t do that deal stay away from it I’m like no no no no I understand the benefit of making a deal like this work now how do we do it so that way both my client the buyer is clean and can move forward and make money and that the seller
isn’t going to get totally have a problem.
Micah Johnson (02:44)
Hey everyone, welcome to the Real Estate Pros Podcast. I’m your host, Micah Johnson. And today I am joined by Mahmoud the Bow Tie attorney from Northern Chicago and Mahmoud, glad to have you man.
Mahmoud Elkhatib (Bow Tie) (02:57)
Thank you for having me. Happy to be here. And it’s Northern Illinois, Chicago area, but you know, North Chicago kind of works too.
Micah Johnson (03:02)
Okay. North Chicago. All right. There you go. Well, Florida guy trying to explain it, you know, we got a reputation. Well, I’m excited for our show today, man. I think your listeners are really going to take something away from your perspective on real estate, how it’s unique. There’s a investor portion along with the real estate attorney portion that doesn’t give most people the view that you have. So for everyone that doesn’t know you yet,
Mahmoud Elkhatib (Bow Tie) (03:08)
Right,
Micah Johnson (03:29)
Tell us a little about who you are, your main focus, and the markets that you operate in.
Mahmoud Elkhatib (Bow Tie) (03:33)
Yeah, absolutely. So we’re a law firm. represent buyers and sellers and investors and people in distress. So we have different parts of our firm. But I’m an attorney. We are in the Chicagoland area. So we serve as Chicago and all the collar counties. And I mean, I think the unique part about me is that I’m actually a chemist. So I look at transactions and I look at situations really from a scientific standpoint on how to untangle it and how to put it together.
So in a nutshell, ⁓ I’ve been I’ve been an investor, I’m a businessman, and I’m an attorney. So that helps me look at things in a different perspective.
Micah Johnson (04:14)
So let’s dive into that. How long did you do investing in real estate before you took that move into the attorney world? And how is that like, how’s that focus in that world now?
Mahmoud Elkhatib (Bow Tie) (04:25)
Yeah, absolutely. So I like I said, I was a chemist to begin with, and I was in manufacturing. So I had to deal with the commercial real estate part of it, right as a owner operator. And then I became a real estate broker. So then I have is representing people and buying and selling houses. And I think the time that I’d spent on paying attorneys over my career, the various different things, I realized that there was more to it.
Attorneys have this we are an amazing group, right? I got to want to that I don’t want to like shit on our own group here, right? But there you have to understand the mindset of an attorney, right? So an attorney goes to high school goes to college then goes to law school and then gets a job and they really are in the legal world and they really haven’t experienced and been in
the actual world. They’ve never been sued. They haven’t experienced what it’s like to get lawsuits. They haven’t experienced how to run a business. So the fact that I’ve been an entrepreneur, that I’ve run businesses, I’ve been investing and I’m an attorney gives me an edge to understand more than just the legal aspects of a contract. It understands the practical aspects of how do I, how does the law support the business, right? And drive the business to make sure this can be successful. So
Micah Johnson (05:41)
Mm, right.
Mahmoud Elkhatib (Bow Tie) (06:33)
You know, like I can read a financial statement.
Micah Johnson (06:34)
What’s a good example that you could share of that, that you’ve applied this perspective in what you do now of how you untangled it to get a good situation?
Mahmoud Elkhatib (Bow Tie) (06:44)
Yeah. Absolutely. ⁓ I think what I’ll get is I’ll get clients to bring me deals and our job is to close the deal. So how do we find a way to make the deal happen? And I’ll give you an example. I had a client come to me with a sub two. And if you’re not familiar with sub twos, essentially the the buyer is not buying the property. They’re buying the borrower’s position on the loan. Right. So simply there. The person you’re buying property from has a 3 % interest rate or 4 % interest rate. And so instead of actually you buy the property, but then you take over their mortgage payments so you don’t pay off their mortgage. Well, that’s a great thing because now you’ve got a loan at 4 % versus paying 7 % or 8 % now in the investor world, right? But if you don’t have an attorney who understands all the nuances, how that’s applied, understands the impact of the potential foreclosure and how the foreclosure works, whether you’re selling it or buying it, you have to understand it. ⁓ And so I think what happens is real estate investors get super excited with deal frenzy. And so this particular client jumped in and just paid a bunch of money to redeem the loan. And now she has a deed and the paperwork was horrendous, but she’s got a deed and she paid off the person’s back mortgage payments. But the foreclosure is still pending.
and there was another loan and there was another lien and you don’t have insurance and like there’s all these things that come up that she wasn’t aware of and so most attorneys like very conservative attorneys would be like don’t do that deal stay away from it I’m like no no no no I understand the benefit of making a deal like this work now how do we do it so that way both my client the buyer is clean and can move forward and make money and that the seller
isn’t going to get totally have a problem.
Because I mean, I don’t want to get too much into it. But if the buyer suddenly stops paying on the mortgage, then the seller is now in full closure again, but has no control over the property. Right? So I would say I think my my approach is how do I look at the total deal? How do I look at it? So my client makes money. And there’s sometimes I’ll look at the deal and be like, bro, let’s run these numbers. I had a
client last night that I spoke to and she’s in foreclosure. She’s trying to figure out how to navigate it. She’s got this massive water lean, which we know how to work around in the city of Chicago. And what she ended up I’m like, listen, let’s just run the numbers. Let’s what does does this make sense after you pay the bank after you pay this off after you pay me after you pay the construction cost? What is the value of the property after you’re done? And is it worth it? ⁓
Micah Johnson (09:34)
you
Mahmoud Elkhatib (Bow Tie) (09:36)
And so I think I don’t, there’s a lot of attorneys who do this, but I think the majority of lawyers in this space are just give me your contract and I’ll run the deal. If it works for you, great. That’s if it doesn’t work for you, that’s your problem. And I think. Yeah.
Micah Johnson (09:49)
Right. Yeah. They want to know what to look for. That’s what’s unique about your perspective is it comes in and plugs in in a way where you understand the end game. You know where they’re trying to get to and not so much where it’s not your end game. Your end game is get the deal done, right? Their end game has a peak to that where if you really understand what they’re trying to do because you have experience doing it, you’ve walked the road.
Mahmoud Elkhatib (Bow Tie) (10:07)
Right.
Micah Johnson (10:16)
I think it’s fascinating that you’ve been in the shoes of your clients. That’s something that’s not like you’re saying. It’s not that common in the attorney world. And attorneys kind of get bad wraps for quote unquote killing deals where the way that you’re approaching this is way more feels like on offense, in my opinion, for the client than for like, you know, as, someone who’s had to go through it. And if I remember correctly, Illinois is an attorney state, correct? Like you is every, does every, yeah, every closing happens with an attorney.
Mahmoud Elkhatib (Bow Tie) (10:27)
Right.
That is correct.
Micah Johnson (11:20)
So, mean, they’re already gonna deal with it anyways, no matter what. So if you find having somebody, I see the value in it heavily. And yeah, absolutely, man. One, thanks for doing it, right?
Mahmoud Elkhatib (Bow Tie) (11:30)
I appreciate it.
Yeah, I look at it and
I’m like, this is the most expensive thing you’re going to buy. Period. Right? Like, wouldn’t you put someone like, would you have someone operate on your heart or your lungs and ask for the guy that’s going to work in the back alley? Right? Or the cheapest? Give me the cheapest doctor. I want the cheapest doctor. No one’s going to do that. And I think in the same situation here, it’s not your body, but it is your financial investment. So
Micah Johnson (11:38)
Right.
Yes.
Mahmoud Elkhatib (Bow Tie) (12:01)
Not
many people spend two, $300,000 at a time. So spend the money to make sure it’s done right. So yeah.
Micah Johnson (12:08)
Exactly.
mean, for one side of the party, it’s typically their largest financial transaction they’ll ever do. And then your investors, they’re doing it all the time. And when you see that, like you said something earlier, like haven’t been sued before. What benefit does that have for you being able to deal with that? Because you don’t just do transactions, you litigate too, right?
Mahmoud Elkhatib (Bow Tie) (12:18)
Right.
True, that’s true. Litigate, we do building code violations and we litigated, we defend foreclosures, right? So we defend borrowers and foreclosure. We do consumer class actions and consumer actions against banks. So yeah, so the idea of being sued, like, so I’ve been in foreclosure, like I’ve had my house taken from me, I’ve had my family’s house taken from me, I’ve gone through that experience, right? And so I think it gives two things. One,
It gives me an understanding that I know exactly where my client is at. So I understand what their pain points are. And not only do I understand their pain points, you ever hear the, I don’t know if you’ve been in the AA world, ⁓ But there is a story of the guy who falls down the hole.
I know if you’ve heard that story, but he guy falls down the hole and he looks up through the hole and he’s like, how the hell do I get out? And the police officer shows up is like, Hey officer, can you help me? like, well, let me see. I got to call back up. Let me do this. And so then the officer leaves and the guy’s still down there. And then the fireman comes, the fireman’s like, I got to get the engine and I can get it at this and I got to get that and I’ll be right back. And so the guy’s still in the hole. Then the priest shows up and the priest is like, God bless you, my son. May you go through. And he throws him a prayer down to the thing and then walks away. And the guy’s like, what?
WTF, right? But then his friend shows up and his friend sees him and he goes, ⁓ and then he jumps in with him. And he’s like, what are you doing? Now we’re both in this hole. And the friend looks at him and goes, I know I’ve been down this hole before. I know the way out. And that is exactly how we’ve operated our firm. We’ve been down this hole and we know the way out. So. But.
Micah Johnson (14:11)
And it’s true because what you’re talking about, you’ve experienced it yourself and haven’t been in real estate and dealt with these types of sellers before, especially in real estate investing, is you’re talking to somebody who’s going through a hard time. Life isn’t exactly easy at that moment. You’re not talking about their most favorite subject. know, typically investors give up on marketing on those properties way before they should because the person just isn’t emotionally ready to have the conversation. It’s the most embarrassing thing.
Mahmoud Elkhatib (Bow Tie) (14:39)
That’s the development anxiety.
Micah Johnson (15:23)
Yeah, it’s like the most embarrassing thing for them that what they’re walking through and any ability to maintain your humanity while in it and then knowing the way out because that’s what all of us are after. Right. We were talking a little bit about masterminds before we started recording where if you know someone who knows you’re good, you’re good. That’s what gets like that’s it. That’s how humans work together. None of us know it all. We all know our little piece.
Mahmoud Elkhatib (Bow Tie) (15:35)
Right.
Mm-hmm.
Micah Johnson (15:52)
And if we can just connect in the way where, okay, I got you for here and you for here, me for here, we’re good. Here we go. Let’s do this.
Mahmoud Elkhatib (Bow Tie) (15:59)
Absolutely. Yeah, no, definitely. Knowing someone who knows what they’re doing is critical. And we were talking about earlier that you have these master gurus that get up there and they start talking about all the great things that they do and have done, but you don’t realize
They make their money from selling you their tickets and selling you their programs, right? Versus actually what they’re teaching. And then you listen to what they’re teaching. You’re like, that doesn’t make sense. Your costs are totally off. Your numbers are totally off. What are you talking about? And I’m not saying they’re all wrong. I’m saying is they’re missing pieces, right? ⁓ And that’s, that’s how to correct.
Micah Johnson (16:33)
Exactly. They’re sharing the way it works for them. And that’s,
that’s what a lot of people in real estate struggle with is real estate is a huge term and there’s a lot of ways to do it. And typically keeping yourself exposed to it for longer, you will find the way that you enjoy doing it. Having coached people in the space before, you don’t normally find the one you really love out of the gate. That’s, that’s, that’s not necessarily the case where
Mahmoud Elkhatib (Bow Tie) (16:44)
Absolutely
Right, right.
Micah Johnson (17:02)
You’re just doing that one. And I watched it lot where just investors naturally grow in the asset classes. A lot of folks start in single family. Then a few years in, they sell that portfolio off, use all that money to get into bigger asset classes, because they just start to realize like, ⁓ that’s not the part I like so much where some people stay at forever. it’s again, just keeping yourself plugged into it exposed and then knowing people who know that’s what gets your mind open to it. Like, wait,
Mahmoud Elkhatib (Bow Tie) (17:20)
Right.
Being
Micah Johnson (17:31)
I didn’t even know that was an option, right? I’m sure.
Mahmoud Elkhatib (Bow Tie) (17:31)
in yeah, being in community. Totally. Let me know, people who know things and have done things differently and interacting. Like you and I were talking about this earlier, right? Like we, we, we like, we get off on talking about real estate, right? We get off on talking about business, right? There’s not everybody’s like that, but if you and I are having a conversation, you’re going to tell me how you’re going to do one thing. And I’m like, my God, that’s a great idea.
Or I’m going to be like, hey, how did you do this? I mean, it’s critical. Like I remember one of my very first rehabs went totally sideways and I was like, what am I going to do? And I just called up my friends and I had like three GCs on speed dial and I would call like simply I’d be like, okay, I installed hardwood floors, right? What do I do now?
One guy was like, well, you can’t touch it for 24 hours. The other guy goes, well, you got to turn up the air conditioning. The other one’s like, turn off the air conditioning. You’re like, well, what the fuck do I do, right? But by talking to different people, I was able to figure out how to finish the project and come out of it on the other side. And so like, if I were to give anybody advice, who’d be like, do not work in a silo. Get people around you, get in the community, get friends, and get the right professionals around.
you
Micah Johnson (18:47)
And nobody
does it alone. That’s what you learn at the highest. The higher levels you grow in anything, the more you see that you only fit to a small part of it. Like the part you do is just a small little piece and all these other things that are happening. It doesn’t diminish it in any way, because everybody’s part’s about the same size, really. It’s just do your little section and do your little section, and then we all grow. Now
Mahmoud Elkhatib (Bow Tie) (18:57)
yeah.
Right.
Micah Johnson (19:15)
Something that’s interested, just you know question about what you have experienced, because of the knowledge that you’ve had, can you think of a time where one of your customers was like, man, I didn’t even think of that, or clients, I guess is the way you say it. Does that make sense? Just one of those moments where it really clicked for you and for them.
Mahmoud Elkhatib (Bow Tie) (19:30)
yeah.
You know,
I what I find I did. So I had a lender, a private money lender come to me and they had lent money to someone and the guy just iced them and they were getting stiff and it was a it wasn’t a huge deal, but it was like $150,000, which is a lot of money, right? And so they were trying to get their money back. They couldn’t get their money back. And I think what I was able to do.
He was and he negotiated the deal. This is the deal has to be and I’m like fine, but I’m drafting your contract, right? And so the way they were going to structure was that my guy would have to wait for his money for the next. He was going to get a chunk of money and then raised wait for the rest of it for like four or five years. And I’m like. If that’s what he wants to do, that’s great, but we’re going to write a contract that makes sure that if he screws it up. We’re bringing the hammer down on him.
And my guy was like, I don’t know. I’m not sure. He hesitated. I’m like, listen, let me just draft it. And I, he goes, well, they need it right now. I’m like, we’re going to drop it at the closing. And he’s like, why would you want to do that? I’m like, just, just trust me. And sure enough, they’re ready to close because he was using the money to, to pay off and release the lien. We dropped the contract.
The guy lost his shit. Like he was like, I’m not signing this, fuck that, blah, blah. Go sue me, I’m going to foreclosure. Five minutes later, he sends out an email to everybody, pay the guy off in full. So what I understood that the borrower’s pain points, sure, you want to pay me off in five years, but I’ll tell you what, I’m gonna tie you up so tight that if you blink, I’m coming after everything. And I think… ⁓
That was something that my client wouldn’t have thought of and wouldn’t have positioned himself because he was like, all right, fine. I’ll just take whatever I can. All right, I’ll take my money. Sure. Because he’s he’s stuck in the emotional piece and he can’t see the strategic way of attacking the case to get to the end goal. ⁓ So I guess I think in a lot of. Yeah.
Micah Johnson (21:37)
Yeah, he saw.
what he thought was a win. was you took what he thought was a win and made it. Boom. You, you made it clear. And I love that. Yeah. I I love that concept because it’s, it’s like my mentor explains is how to ask a good question. Like, you don’t just go right out and ask you go up, you just get to the edge of it. Right. Like when you meet a girl and y’all are hitting it off, you don’t just grab her hand, you slide your hand close and see what happens. And then, then you can tell where you’re at and just having that option.
Mahmoud Elkhatib (Bow Tie) (21:46)
Red slip.
Right. Yep.
Micah Johnson (22:09)
forces someone to think, wait a second, that’s not what I want. And I can actually do this, which in the end, that’s what your client really wanted, all of their money. And having that ability to think outside the box is powerful, man. Okay, so wrap this up. You have an incredible experience in just, sounds like life, honestly, going through foreclosure yourself. You’ve owned businesses, started as a chemist, moved through real estate brokering. Like you’ve been in the shoes of your clients.
Mahmoud Elkhatib (Bow Tie) (22:19)
Correct.
Correct.
Micah Johnson (22:39)
If someone’s listening and they want to learn more from you or connect with you in an area that you’re in, what’s the best way for them to do that?
Mahmoud Elkhatib (Bow Tie) (22:47)
Absolutely. So we’re going to give you all of our social media, you could drop it in the chat. They can reach me they can call my office. I’ll drop my number. It’s 312-775-0980. Or you can find this at evlawgroup.com or the foreclosure defense law office.com. We’d love to hear from you. I have a whole team of people that I’ve I’ve operated on to make sure that we service our clients, right? So reach out to us. We’d love to chat.
Micah Johnson (23:17)
Excellent. Excellent. We’ll make sure your social media and the information is in the show notes on this. And if you got value from today’s episode, thank you for listening. Please like this episode, subscribe to the podcast. Mahmoud I really appreciate you being here, man. Thanks so much.
Mahmoud Elkhatib (Bow Tie) (23:31)
Micah, thank you so much. It was a pleasure.
Micah Johnson (23:34)
Absolutely, we’ve got more conversations with operators just like Mahmoud who are out there building real businesses in this space. Thank you so much, we’ll talk to you soon or we’ll see you on the next one.
Mahmoud Elkhatib (Bow Tie) (23:45)
Take care.
