Legal In CA...some Say Yea, Some Say No.......Im Confused
Ok.....this is what i have. Borrower currently in nod, and have had no luck in finding him financing. As Im sure you know, most hard money lenders dont like anything over60-65% LTV, and on a rare cases 70% LTV. Well I need 75% to cover payoff of the 1st, arrearages, Lender fees, and Broker fees.
So...this is what I came up with.
He sells the prop to me, as an investor, with a 2yr lease option. Here are the numbers,
Appraised in Jan. 06 for 335k.
Sells to me for 295k.
Owes $220500+$16500 in arrearages and fees.
Est. $24k in rent advance ( this will be used to make half the Mortgage payment for the 2 yrs, renter makes other half to show rental history for the 2 yrs. ) account to be held in Investors name. Balance, if any, minus interest, refunded to seller upon exercise of option
Est. $2k for supplimental taxes, also to be held by Investor.
$10k to Investor as non-refundable deposit.
Est. $4k to seller to go toward collection payoffs out of escrow so these wont be an issue when it comes time for him to refi it back ( credit repair ).
Est $8k for closing costs
$5k to seller for rent buffer ( in his account )
$5k to sellers pocket.
At the end of the 2 yr option he can then buy it back for what i bought it for.
So I guess my question is, is this structured correct, is there a better way to do this(please provide). I know that it is risky, but whats the worst that could happen, he walks with $10k + $4k for collection payoffs, im left with $34k cash, and 10% equity. As long as everything on my end is disclosed, since i am licensed by CA DRE, could this come back to get me if he claims he was taken advantage of? Recently there has been alot of negaitve publicity about this sort of investing in CA.
What other avenues could I take, if this is not legal.
Any advise is appreciated.
Worst that can happen is that he says that he did not realize he was selling you the house. You sleazy investor took advantage of a man in trouble and the judge reverses your deed and he now owns the house again. How much money would you have lost?
He can simply claim that he is still the owner and you borrowed money to bail him out of his situation.
I might suggest reading CA Civil Code 1695...
http://www.leginfo.ca.gov/cgi-bin/waisgate?WAISdocID=9210011526+0+0+0&WAISaction=retrieve
Thank you all for your input and insight.
Thank you mcole for the link to the legal aspect of this, however, i cant seem to get to work. It seems that it does not matter how you structure any deal, anyone can claim anything, shoot any deal full of holes, someone is always looking to srew you over. The world we live in huh................aint it beautiful!!
Life is to short for this kindda b.s......I think ill just surf!!
Thank you mcole
They seemed to work this time. I will read through this and see if this is some thing I want to get involved with.
Thanx again for you advise and insight.
I will look for your pm. Never surfed down south, so I look forward to checking out your favorite break.
I will deffinatly look you up when I make it down.
Thanx again for your insight on the other matter.
Ryan.