I don’t quite understand why FHA doesn’t remove the stupid “90-day” flip rule??? We as investors are doing our part in stimulating the economy, right? Why is the gov’t putting a damper on getting deals done and getting houses moved??? WTF? ('cuse me). I mean seriously! I might be losing a deal due to this stupid rule.
Story:
I’ve been working on this deal since May of last year (yea). I finally got it negotiated and found a qualified buyer. I had the homeowner quit claim me his property in June. The following month in July the property was foreclosed on. I had the H/O assign his rights to redeem the property to buy more time. Long story short I ran out of time and the property became and REO. Since then, I’ve made an offer to the new RE agent hired by the bank and am hoping to assign the contract to the same buyer.
Two questions I desperately need help with:
First, can you guys (SS investors only please) tell me whether you have the H/O quit claim the property to you (or ur LLC) or, do you do execute an “Assignment of Contract” with the end-buyer instead? I figure if I’m (my LLC) on title, the day it funds, the remaining cheddar goes to me as the seller, since I’m on title.
My second question is to all Wholesalers (ok wholesalers only now lol) Since the property is no longer a SS and is now an REO, I’ve heard lenders don’t do assignments. How do you get around this problem then? You’re using the end-buyers money to cash you out. (hope stephanie replies bcuz she’s the “Wholesale Queen”)
I have 20k at stake here. When it “was” a SS I got the bank to accept 90k and I have it sold at 110k. I don’t want to lose this deal. :biggrin
BTW, I befriended the new agent hired by the bank and got her to “work” with me. I told her my sob story and made her an offer to tie it up before anyone else and she is not going to take any more offers because she wants to help me. Besides we already have the end-buyer in place so why would she go elsewhere, right?
When we are doing short sale flips I do not “get the deed”. we use an option contract to tie up the deal, fund the transaction, and re-sell the property to the end buyer.
You can take the deed and put it in a land trust where you have the beneficial interest, record the trust, and that way you can get around the seasoning for FHA.
You still have to do 2 closings though even if you were on title. The way the short sale is set up is that the seller receives no proceeds on the sale. So you would not be able to collect your fee if you were the “seller in foreclosure”.
As far as it being an REO now and you wanting to assign the contract…You will not be able to assign the contact the usual way. When you put your offer in at the bank sign the contact as trustee. Ex: Jon Zorrer, as trustee - When your offer is accepted instead off assigning the contract you are going to sell the beneficial interest in the trust to your end buyer. You have to collect your fee before you assign the beneficial interest to your buyer. If you don’t they do not need you anymore.
You could also do this by buying the property in an LLC and selling the LLC to your end buyer. Either way will get you around the no assignment clause the banks have.
Jon you meant record the deed with the trust as grantee not the trust document correct?
I wouldn’t suggest recording the trust documents… And make certain that on the deed that you indicate the name of the trust before the name of the trustee… if the trust name is shorter then 20 or so characters then lengthen it.
First of all, when the deed gets quit claimed to you, you’re responsible for making the payments. You didn’t do that, or the property would not have become an REO. You did a disservice to the seller and made other investors look bad. Taking the deed is something you might do for s Sub2 deal.
On your second question, you can’t use the end-buyers funds to buy the house. You can do two transactions. A to B and then B to C, using the same settlement or title company and closing on the same day. You can fund the A to B part, using a transactional funding source.
What’s all the talk about befriending and flirting with the agent. You don’t seem to take you role as an investor very seriously.
I know enough now, finally, to know that ultimately the beneficial interest held by the Trustor(s) will be assigned to the buyer’s entity prior to closing on the A-B transaction. If the Buyer is an LLC, and the Trustee is a separate entity, say a corporation, thus not the direct Purchaser, this is best because some banks see this as not an arm’s length transaction. My bigger concern is with a potential conflict of interest with the fiduciary responsibilities of being a Trustee vs. being the Buyer, not with the Bank; the purchase agreement makes it clear that I’m purchasing the property, intending to make a profit.
But is it mandatory, for the deal to fly with Lenders, that these two entities be held by different parties?
I would think the real exposure (liability) is with the Trustors who may wonder how the investor gets to profit from the deal yet they may be left with a deficiency judgment (which they would have had anyhow, had the property gone into foreclosure), and the investor is seen as profiting at their expense.
How “mandatory” is it that the LLC and the Trustee entity not be owned by the same person? Is it worth it to hire someone like Ward Hannigan to be the Trustee, at $120/year? I want my “deals” to be squeaky clean, legal, and seen as fairly representing the borrower’s interests because they avoided the foreclosure. And, of course, if there is a way to completed settle all liens, we’re going to get that done, as well.
I’ve closed short sales using the end-buyers money before. That was the whole purpose of me being on title. If my LLC is on title the difference goes to me (my LLC). I do let everyone know what my intentions are going to be up front. I don’t want any problems. It does vary from title company.
I’m in New Mexico btw (by the way)
My questions were just simply if having the h/o quit claim u their house is a good idea. Lately I’ve been reading it looks fraudulent. I decided to structure them differently such as an “assignment of contract” and assign the paper.