Sorry, but it doesn’t make sense. If you’re not closing with cash, I have no idea how it’s being done through seller financing on a short sale… :huh
So what would be the difference? Cash is cash and the lender has no clue whether it was my cash or the end-buyers cash. Don’t be confused by my seller financing comment. I probably shouldn’t have mentioned that, but as far as title is concerned, seller financing or just simply selling look exactly the same on title (except for the original lien being paid). It’s handled as a warranty deed that transfers title to the buyer. Thats why I mentioned it to draw the parallel that it is the same thing.
Is that situation there aren’t “2 ends”. There is one end because I am on title and selling the property. If I go in to a seller financing situation and have title deeded to me, I don’t have to have cash to close on that deal do I? Same thing, title can be deeded to me without any cash exchanging hands. Then I am the rightful seller of that property and am entitled to receive the compensation as such once the liens have all been satisfied. It’s not a double closing technically. If the original seller is receiving cash from the transaction, then yes, I can’t do this because unless the seller is an idiot he is not going to transfer title without seeing HUD’s. But if the seller is not receiving cash, he/she can transfer title to me and then I am free to do as I please with the property, including sell it and get money from it.
I am not going to post about this anymore because I did not come on here to be argumentative, came to help provide options for investors. Have used this scenario many times for myself and for clients. Feel free to use it or not. Happy investing!
I don’t see anyone being argumentative with you, but I think you’re providing great insight and I think I finally get it.
if I understand correctly…
-
You have a short sale deal and the seller deeds the title over to you, so you have ownership of the property. Shortsale is approved at $100k and you have a buyer at $140k.
-
At closing, actually i still don’t get it!… I’m trying to understand, but it only makes sense if it’s an all cash deal. This way, you can have the buyer bring $140k cash to the table, and have the 1st HUD read $100k and you can keep the remaining $40k.
But, what if the end buyer is financing through mortgage? Then, the first HUD will have to show $100k closing… and there will have to be a 2nd HUD to show the $140k closing. am i right? I mean, you can’t let the bank know that the property is being sold for $140k if they agreed to take only $100k.
And I still don’t get what you mean by seller financing on a short sale deal. Pls break it down in laymen’s terms… your explanation is tough for a newbie to understand.
Good questions! I keep using the seller financing deal because it works the same way, but for simplicity, just scratch that idea.
If you own a property, and you and I agree to, we can walk into a title company together, and you can sign a warranty deed transferring the title to me. No HUD’s necessary. No bank notification necessary. Nothing but you signing the warranty deed transferring the title to me. That deed gets recorded, and I am on title. I OWN THE PROPERTY. Simple as that.
(This next part isn’t really important for what we are discussing, just FYI) There is a caveat to this method, and that is that the bank has the right to call the mortgage due in full. This is where the whole land trust idea came about so that investors could avoid doing anything that triggered this due on sale clause. However, in this case, the bank isn’t going to know nor care, and they usually don’t, especially in the case of a short sale, so we can simply transfer the title to our name (which we are not doing until after the bank approval of our short sale and at the same time of our sale to the end buyer). But don’t worry about all that for now because it is not important for what we are talking about.
So, now that I am the legal owner of this property, I can do anything I want with it. I can sell it, keep it, whatever. So I want to sell it? OK. I list it, find a buyer, we go to close. The title company looks and says ok, in order for this to close, we have to pay off the liens against the property (this is what happens in every RE transaction). So once the money is sent to the title company, they pay off the outstanding mortgage(s), and the rest is mine. This is very simple, but only applies to a situation where the original owner is not getting any money from the sale. Hence, no HUD. There is no financial transaction taking place when you and I go to the title company and you sign the title over to me, so there is no need for HUD’s.
Title companies, nor anyone else, notifies lenders when the title changes names. They usually find out because some investors are not up to speed in the beginning and they will go have the homeowners insurance put in their name, which notifies the lender. Even then as long as payments are being made they usually don’t care.
I think the part you might be understanding is that you and I can walk into a title company and you can GIVE me your house in about 5 minutes. No money, no permission, no nothing, just you signing the forms, a couple hours later it records with the county, and now I am the rightful, legal owner. Sure, as I said before the bank may call the mortgage due in a situation like that, but when we are closing on the same day it is not an issue.
Feel free to PM me with questions. I’d even be happy to chat on the phone with you. I don’t have anything to sell you. Just like to contribute my little tiny bit of info because I have learned so much on here. Givers gain.
Hey guys thanks for your input. I have another quesion.
My first SS I did back in February was something like this. I had the H/O deed his house to me with no money. Now the property is mine. I was negotiating a SS with HSBC and finally got an approval. I then listed it for sale. (i never “closed” at a title company with the H/O, i just had him sign away) I got an end-buyer in 4 days. This end-buyer was approved with Countrywide. I used their money to fund the deal. (BTW, Countrywide requires 3 mo seasoning to sell a house). Luckily, I had been on title this whole time since it took forever.
Question:
Couldn’t I have closed without being on title? (selling a property that isn’t mine?).
For example:
I find a distressed H/O I get all the paperwork together to negotiate a SS authorization, etc.
Negotiate with lender to take a loss, agree on a price with lender. Turn around and sell it w/o listing it for sale on the MLS. Then find a qualified end-buyer to fund deal. But then how do I get paid if i’m not on title??? :banghead
Hey Torojd:
You mentioned that you just had your first SS in February and that U had your end buyer in 4 days. Can you share your technique on how you got your end buyer in just 4 days? through advertising in newspaper?
:help
To my knowledge double closings are not illegal! We have the best real estate lawyers in our city and they are doing these all day long! It is true everyone should know your state laws! There is only one lender we are having problems with oVER double closings and our company has decied NOT to do deal that have them any longer! They are or have been horrid to work with! Everyone should have an attorney and by all means check with them FIRST! we did and it has been great! They have however had to explain this process to several people along the way, which they do not mind doing at all!
Understood, no HUDs necessary up to this point. But I assume you’re doing this on the day of, or the day before closing.
Major problem here. If this is a short sale, how is the remainder of the money yours? If the bank agrees to a $100k payoff, and you sell the house for $150k, then the title company will record $150k on the HUD-1 that must be sent to the bank at closing. So how will the title company pay off the $100k and allow you to keep the $50k???
In all short sales, the owner gets no money from the sale, but there’s always a HUD being sent to the bank at closing because the mortgage belongs to the original homeowner. There’s no HUD when you transfer deeds, but what about the HUD at closing? That HUD will have a sale price of $150k, with $100k going to the bank… and the bank won’t allow you to keep the remainder of $50k.
Again, I really, really appreciate this, although I’m still very confused. You have my #, and I prefer to discuss this directly with you to come to a solution… a solution that would be PRICELESS at this point in my career.
Raj-
In NY & NJ, “subject to” as a buying method is taught in the real estate agent’s licensing class. I find it hard to believe that an agent would be in violation for recommending this to a seller as a means of getting rid of a property, especially if it is in the seller’s best interest to do so. We are also specifically taught not to give legal advice. It is up to the seller’s attorney to explain the DOS ramifications of selling via sub2 to the seller. That’s what lawyers are for.
Good. Then I the majority of NY and NJ RE agents should know all about sub2’s then. I’m sure.
However, I’m not talking about a plain-jane RE agent. I’m talking about a card carrying member of the Nat’l Assoc. of Realtors, my friend.
That li’l ol’ organization has a small ol’ thing called a code of ethics. In it, it says that as a Realtor, we will not promote clients to break contracts in which they have entered into of a legally binding nature. An example of that would be a violation of the DOSC in a mortgage contract.
So, in short, if you encourage the action, then you are in violation of the COE. If you know about the action and fail to report it, you are in violation of the COE.
Plain and simple. Just read the COE or look up the cases concerning it.
And yes, we as agents, are NOT supposed to be giving legal advice. That includes telling someone THAT it is okay to sell via sub2 WITHOUT that advice from an attorney.
Raj
I sold my property in 4 days becasue at the time i was licensed (agent),
I had the h/o deed the property to my LLC .
My LLC then hires me to list the property for sale.
I listed it on the MLS and another agent brought me
a buyer who was already qualified.
Was this a short sale? I don’t understand your objective in this. Why
didn’t the h/o just hire you to list the property?
I doubt it is illegal, but the bank will be pissed because they hate loaning more than the house is “worth,” but that’s the bank’s problem … I agree with the person that said show me what law is broken.