1) joint tenants, 2) tenants in common, or 3)community property with right of survivorship rather than holding it as community property.
...
...
...
... Once a couple has established a joint tenancy, they may later agree to change the property to community property. This is called a transmutation agreement. (A transmutation agreement may be used to change any separate property into community property, or to change c ommunity property into separate property). Any transmutation agreement must be in writing to be valid."
The answer to this question depends upon what State the property is in, but the short answer in general is no.
As kittiwulfi points out there are ways in some community property States to turn community property into seperate property, but a quit claim deed is not typically the legal instrument used to partition interests in real property. And once the partition is completed a quit claim deed may or may not be best device to transfer ownership.
This is definitely a question for an attorney familiar with the real estate laws of the State in question.
Community Property State:
The following States are community property states:
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. (plus the territory of Puerto Rico)
All other States are non-community property States.
RULES are different in all of them....SEE AN ATTORNEY for safety to be sure.
--------------------------------------------------------------------------------
In Kentucky (non-community ) for one party of a married couple to buy property in their own name it must be with a "DRY TRUST" created for that to happen.
I am not a mortgage expert, but how is it loan fraud?
Femur, just be careful. This scenario that you discribe is a very common one where the "business partner" takes advantage of the investor. They give you a little bone in the being, the 10k and leave live you holding the bag. Notice that his LLC makes the 40k, and you end up with a house at appraised value that needs probably a lot of repair. And who is it that did the appraisal? Was it someone that you chose, or was it someone that the investor/realtor/mortgage broker (who are probably all VERY closely linked) choose? I would get an independent appraisal, or you might be stuck with a house that needs more work that you could ever imagine that could never sell for 60k on a good day. This scenario might even work for a deal or two, but unless you trust this business partner with your checkbook, my guess is that one day you will get stuck holding the bag. BTW - I have helped somone in foreclosure on their "investment" that had they exact some set up that you described. He was the straw buyer and they business partner lost interest in helping him rehab the house after the first month.
If you think about, it’s really no different than finding a deal under FMV, upping the sales price, then having an agreement with the seller outside of escrow to get cash back. That’s a no-no.
Except this is actually worse, because you already have half interest in the property to start with – which isn’t being disclosed either.
I know people do these types of deals all the time, but that doesn’t make them legal. And on top of it, you have the added risks that Brenda and Loon point out.
If you find a $20K property that appraises at $60K before repairs, why not just get a rehab loan or hard-money loan, fix it up, REFI it, and put a tenant in? You accomplish the same thing without breaking any laws.[ Edited by mcole on Date 11/03/2005 ]
New Kid, My partner and I both put in 10k initially to buy the house. When I buy the house back from him for 60k, we both get a check for 30k. So we both come out of the deal with 30k - 10k (initial investment) = 20k profit for each of us. You make the money on the front end of the deal, and take that money to buy more properties in the same way. We will then Section 8 the houses for the next 10 - 15 years until they are paid off. At this point we will sell them and split the profits. My business partner and I have been best friends forever and I trust him with my life. EVERYTHING will be split 50/50. Half of the properties will be owned by my LLC and half by his.
Quote:
On 2005-11-05 00:25, femur wrote:
When I buy the house back from him for 60k, we both get a check for 30k. So we both come out of the deal with 30k - 10k (initial investment) = 20k profit for each of us.
What you are really doing is just obtaining a loan to buy it from yourself. And as has already been pointed out 3 times, if you don’t disclose that, it’s lending fraud -- pure and simple.
[ Edited by mcole on Date 11/05/2005 ]
I will quote:
"Husband and wife may share title to property as:
1) joint tenants, 2) tenants in common, or 3)community property with right of survivorship rather than holding it as community property.
...
...
...
... Once a couple has established a joint tenancy, they may later agree to change the property to community property. This is called a transmutation agreement. (A transmutation agreement may be used to change any separate property into community property, or to change c ommunity property into separate property). Any transmutation agreement must be in writing to be valid."
P.S.: Consult your attorney
The answer to this question depends upon what State the property is in, but the short answer in general is no.
As kittiwulfi points out there are ways in some community property States to turn community property into seperate property, but a quit claim deed is not typically the legal instrument used to partition interests in real property. And once the partition is completed a quit claim deed may or may not be best device to transfer ownership.
This is definitely a question for an attorney familiar with the real estate laws of the State in question.
Community Property State:
The following States are community property states:
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. (plus the territory of Puerto Rico)
All other States are non-community property States.
RULES are different in all of them....SEE AN ATTORNEY for safety to be sure.
--------------------------------------------------------------------------------
In Kentucky (non-community ) for one party of a married couple to buy property in their own name it must be with a "DRY TRUST" created for that to happen.
I am not a mortgage expert, but how is it loan fraud?
Femur, just be careful. This scenario that you discribe is a very common one where the "business partner" takes advantage of the investor. They give you a little bone in the being, the 10k and leave live you holding the bag. Notice that his LLC makes the 40k, and you end up with a house at appraised value that needs probably a lot of repair. And who is it that did the appraisal? Was it someone that you chose, or was it someone that the investor/realtor/mortgage broker (who are probably all VERY closely linked) choose? I would get an independent appraisal, or you might be stuck with a house that needs more work that you could ever imagine that could never sell for 60k on a good day. This scenario might even work for a deal or two, but unless you trust this business partner with your checkbook, my guess is that one day you will get stuck holding the bag. BTW - I have helped somone in foreclosure on their "investment" that had they exact some set up that you described. He was the straw buyer and they business partner lost interest in helping him rehab the house after the first month.
Jam200 is right. It’s mortgage fraud.
If you think about, it’s really no different than finding a deal under FMV, upping the sales price, then having an agreement with the seller outside of escrow to get cash back. That’s a no-no.
Except this is actually worse, because you already have half interest in the property to start with – which isn’t being disclosed either.
I know people do these types of deals all the time, but that doesn’t make them legal. And on top of it, you have the added risks that Brenda and Loon point out.
If you find a $20K property that appraises at $60K before repairs, why not just get a rehab loan or hard-money loan, fix it up, REFI it, and put a tenant in? You accomplish the same thing without breaking any laws.[ Edited by mcole on Date 11/03/2005 ]
I agree with Brenda and Loon. I have seen this same situation in person, and in this case it was a definite scam to the investor.
What city are you located in? I know of a "Business Partner" who has run this scheme in a few different cities.
You would also have to worry about seasoning issues giving that the title will be transferred to the LLC and then "sold" again. Something to consider.
New Kid, My partner and I both put in 10k initially to buy the house. When I buy the house back from him for 60k, we both get a check for 30k. So we both come out of the deal with 30k - 10k (initial investment) = 20k profit for each of us. You make the money on the front end of the deal, and take that money to buy more properties in the same way. We will then Section 8 the houses for the next 10 - 15 years until they are paid off. At this point we will sell them and split the profits. My business partner and I have been best friends forever and I trust him with my life. EVERYTHING will be split 50/50. Half of the properties will be owned by my LLC and half by his.
Quote:
On 2005-11-05 00:25, femur wrote:
When I buy the house back from him for 60k, we both get a check for 30k. So we both come out of the deal with 30k - 10k (initial investment) = 20k profit for each of us.
What you are really doing is just obtaining a loan to buy it from yourself. And as has already been pointed out 3 times, if you don’t disclose that, it’s lending fraud -- pure and simple.
[ Edited by mcole on Date 11/05/2005 ]