Closing Next Week, HELLLLPPPPP!!!!!!!!!!!!!!
Hi folks,
I was suppose to close on a house next week, but the mortgage broker just made me aware of some issues. She said that the loan will be rejected because of the way the deal is structured. Jim the investor made me aware of a house that he has under contract. Jim will flip the contract to me for $101k (he is making $11k) and I already have a homeowner lined up who wants to purchase the house at $140k, FMV is $150k. How do we structure this deal? The purchase contract that is between Jim and the orginal homeownerrs is for $90k. I was thinking that we should be able to record a mechanics lein for $50k. And that would make up both Jims fee and my own. What do you guys think?? Thanks, Tim 
I don't have a solution for you, but here is the lenders side. They see 4 people in the "chain of title" (owner, Jim, You, Buyer) and red flags are flying. 2nd, 90k to 140k is a big discrepancy in FMVs, so even more flags. Also, they are out underwriting and servicing expenses for a loan they won't keep. Lenders and brokers make money on yield, the expectation that the loan will remain in service for x amount of years to ensure profitability. Add all that to the current environment of a lot of fraudulent flips going around, and they are very wary.
First - get Jim out of the chain and have him assign the contract to you so you close with the seller at $90K. Jim gets paid his $$ when you close with your buyer. Have Jim tell the seller the closing will be in his partner's name, you.
Second - show the comps that justify the FMV of $150K to the mortgage company. They are worried about mortgage fraud. If they are comfortable their note is sufficiently backed, they'll be okay. There are plenty of other mortgage companies and as long as your buyer qualifies, they won't want to lose the deal.
Third - if possible, do a double close and have the closing attorney hold the title in escrow between closings so you are not listed in the chain. It goes straight from the seller to your buyer. If not, the mortgage company should still be okay with only one intermediary.
Sounds like a sweet deal. Good luck
Peter
Does the seller know about your flips? Does he have an attny? If yes you could re-execute a contract direct from seller to your buyer with a Letter of direction to the title company to pay you guys.
Hi all,
Heres what the principal broker advised us to do (she says she had a closing like this last week and has done 5 in total like this one) take everyone out of the picture except the seller and the buyer and have them sign a new purchase contract for X dollars. She then said to add an addemdum that stays with her that states that , Jim and myself will receieve Y dollars. Anyone else have any more ideas? Thanks, Tim
I would be hestitant to have the seller know that there is a spread from 90k to 140k. But if you must.
Another option would be to have two closing. The first close is to put the deed into a SMITH FAMILY LAND TRUST with you as benficiary and trustee. You sign the second P & S contract as the trustee. In the second close you sign all the closing documents as the trustee.
Brenda
Hi Brenda,
I thought about that but the broker says that the bank would look at that as a flip and kill the deal due to seasoning issues. Thanks, Tim[ Edited by HasSpoken on Date 05/13/2004 ]