Refinance Prior To Purchase
I got a call today from someone who wants to sell their property. The ARV of the property is about $220k and it only needs new CHA, exterior paint, and landscaping. She owes $125k and wants $25k to walk and allow me to take over subject-to. Since her mortgage was a 3 year ARM and is due to adjust in 2 months, she said that she would refinance the property and then sell it to me subject-to. The only thing is that she wants to walk with $25k. I plan to have her transfer title to a land trust and then buy the beneficial interest.
My questions are this:
Is there anything I need to watch out for with having her refinance prior to selling? I have done subject-to but never a refi prior to.
Can I have her do a cashout refinance and then buy the property from her with her paying me? Lets say she wants $25k to walk and to keep it simple no closing costs involved - she refinances for $175k, pays off existing mortgage of $125k, she gets $50k after the refinance. I agree to buy the property for $150k subject to the existing mortgage of $175k so she gives me $25k at closing. Can this be done?
Is there anything else you can tell me about this situation? BTW, I am a mortgage broker, so I would do the mortgage, then have her sign the title over to land trust with my LLC as trustee (my LLC is not involved with my mortgage company).
Have you heard of RESPA?? If everything goes fine with the transaction and you end up selling the property, the loan is out of the sellers name, no problem. If there are issues, and there can be many, it can get really bad really quick.
The problem is that you should only be one part of the transaction. You know that there are many parts, buyer, seller, lender, broker, agents, etc. When you are two or more parts of that equation, you are just asking for trouble.
I would let someone else in the office do the loan, or just let the seller re-fi somewhere else. There is too much of a chance for them to say that you forced them to re-fi with you or else you would not do the deal.
Be careful and DISCLOSE everything!!!
I can not imagine giving someone $72,500 when they are about to lose their home. And then you cant make the mortgage payment?? How about giving them 30k and then you can have the lender build in 6 payments, 9 payments, or even a year. Also, you will have more equity in the end when you sell. Giving the seller so much cash seems a bit much.
OR
Give them part of the money up front, and the rest when you sell. they can have a 2nd on the house that is due in 1 year.
Will a hard money lender accept to lend me money an pay it back after the house is sold, or not?