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Lexie(UT)

Need to assign agreement back to seller

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Give option to Title company give contract between seller and the end buyer to title company. Tell title company to give you the overage. Does your option agreement state how you can exercise your option to buy? If so you need to follow those instructions. Then tell the title company that you will cancel your option agreement so the new buyer can buy. Read this thread again. Good info.

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So what your saying is that a lender wouldn't mind if the buyer pays $25,000 over appraised value

and the profit is mine

Sounds to good to be true, i have read this thread like three times. i picked up some great advice

Can't wait for the reply

Once again thanks

 

C.R.E.A.M :ninja:

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FYI

I have been very busy over the last week and have taken this topic very seriously. I will be around all weekend and will post a conclusion over my research.

 

Also, I want everyone to know this is not a novice thread here. I have been paid on options in just about every form, but this continues to be so much in the dark there must be some answers. Also, in MI people are getting cracked left and right with fraud and that is why I have gone back to the drawing board with this issue.

 

I know we can be paid on options, but I want to know what the problem is with so many lenders. Even with lenders that don't require seasoning.

 

I will post a very detailed post sometime over the weekend. It will be from factual data that I have compiled over the last 14 days by working with RESPA, lenders, mortgage brokers, fellow seasoned investors, title companies and real estate attorneys.

 

Stay tuned.

Adam

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Hello all,

 

Reading over what we have been speaking about for the last week or so I decided to put in detail the steps in the process the way I do the option to flip method. It all starts with a seller.

 

1. I option to buy a home at least a 15-20% discount from Seller 30-90 days. Seller signs option and disclosures.

2. I check title to make sure there are know skeletons in the closet.

3. If title is good I start marketing to buyers list and buyers.

4. Once I find a buyer I get a 1003 Loan application to Mortgage broker.

5. Mortgage Broker informs me that buyer is ago under certain terms.

6. I send letter to seller telling them that I want to exercise my option to buy.

7. I inform Seller that my buyer is getting 3rd party financing that requires them to go into contract with title holders.

8. Seller to sign Option to release fee it gets notarized.

9. Seller and Buyer sign a contract for Anticipated appraised value.

10. Contract is faxed to Mortgage Broker.

11. Mortgage Broker orders title, appraisal.

12. Option to release Fee is turned into Title Company.

13. Mortgage Broker informs me of conditions.

14. I follow up with buyer getting all conditions made.

15. Appraisal passes.

16. Survey is ordered

17. Title company faxes HUD to lender for approval

18. Lender emails documents to title company

19. Closing is set.

20. I inform seller and buyer the times to show up

21. Money is wired to my account

22. Buyer and Seller are happy.

23. I follow up 7 days later to check with buyer and seller. Get testimonials.

 

Well that is basically it. There are some minor details but you can see the map of the process.

 

I hope Adam will post his results for Michigan, as it will be interesting to find out.

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This has been a great thread! Full of practical, street level information that everyone here can benefit from. Kudos to Jonathan and Adam for being so generous with their smarts and their time. Thanks, guys! :)

I'm pinning this thread for the time being.

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Hey all,

First off, Jonathan, GREAT information!

 

Second, this thread is about to go down into history as one of the most informative and "gut spilling" threads ever created.

 

Coming soon. (I have family stuff going on tonight so I'll be posting later)

 

1. How to flip an option several different ways depending (or not depending and why) on lender guidelines (Jonathan has this pretty much covered, but I'll add a few more for good measure)

2. How to flip while creating a note and/or seller financing

3. How to give a buyer their funds for purchase (if the lender does not require sourcing or seasoning) by using an option to avoid very specific lender traps.

4. What is considered a RESPA violation and how many people are doing completely illegal and fraudulent investing and don't even know it.

 

This is where I have been working over the last two weeks. The information has been incredible, but since I put myself out into the public so much (Not that that's an issue), and because of the buyer's market in MI, I am trying to do this the right way. Everyone in this market is getting "too creative" and some of them are going to jail. AND ALMOST EVERY GURU FROM MI HAS PUT THEIR TAILS BETWEEN THEIR LEGS AND SPLIT THE STATE! YOU KNOW WHO YOU ARE!!!!

Once more, stay tuned. I'll try to get the post done by the AM.

Regards,

Adam

PS On the cover of the Detroit News just last week, MI was voted the number one worse economy in the country. What does that mean to investors? OPPORTUNITY!

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Okay, here we go.

 

1. How to flip an option several different ways depending (or not depending and why) on lender guidelines (Jonathan has this pretty much covered, but I'll add a few more for good measure)

 

Most lenders are only worried about one thing, their investment. What this means to us is that they have guidelines that they have with their representatives. This is why there was such a big issue about getting paid on an option. However, as Jonathan has said, this issue is almost always only up to the title company.

 

One point to make up front, is that this thread is going into so much detail because of a few things. A. is because of all of the issues with illegal flipping around the country and B. because of all of the issues with shady acquisitions where people didn't have a true interest in the property.

 

How I see it.

When you have an option, you are acting as a principle. Not only does that give you legal right to control the property, but it gives you a responsibility to do things right. I.e. have the right appraisal etc. Now, there are many ways to get paid on an option (as previously mentioned) such as a release, a claim of interest etc. But the main objective to this thread was to go through this on the lender's guidelines. HOWEVER, what had become extremely obvious, is that this issue is NOT with the lender but with the title companies. So, if the title company is willing to pay you on your agreement, then it's most likely a done deal.

 

Ways of flipping an option.

1. Release of option agreement with settled price

2. Claim of interest from a promissory not (Promissory to pay from the assignment of your option)

3. Assignment agreement (Usually cash deals only)

4. Partnership agreement with buyer/investor and assign interest

5. Power of Attorney (mostly cash deals)

Other methods have already been posted.

 

2. How to flip while creating a note and/or seller financing

 

Taking an option that allows you to create a note (land contract, deed of trust or mortgage) and assign interest.

What takes place is simple. We could argue that a sandwich lease option is the same thing because it has the value of seller financing. However, the note is not really being created just the terms are. So to stick to the issue at hand, I am going to explain how this can be done with the note buyer.

 

If a property is purchased at 60% or little more on the dollar, you may have the ability to create and sell then note. This could be done by controlling with an option and having verbiage in the option allowing for the creation for the note. i.e. buyer gives optionee the right to purchase the property at x % with x down and payments of x on a x year land contract with a balloon payment in x years.

 

What this does is allows us to have the option to terms. The terms can then be presented to a third party (buyer) and then once their credit is ran you can create your note and sell it to a note buyer for up to 85-90% LTV if the buyer's scores are high enough. (usually 600 or more) This method can also be done with a double closing so the buyer has no idea what you're making on the deal.

 

Advantage: In all honesty this is a cash deal because most note buyers are not affiliated with national banks such as Chase and Country Wide. You can do whatever you are capable of.

 

3. How to give a buyer their funds for purchase (if the lender does not require sourcing or seasoning) by using an option to avoid very specific lender traps.

 

Pay attention here, this is a big one.

 

If a lender does not require seasoning or sourcing (I.e. they don't care where the buyer got their money), then this gives the opportunity to lend the buyer their down payment. I.e. get a motivated buyer working with you.

 

Now here's the pitfall. Although most lenders don't require sourcing, they are still contradicting themselves by making sure it doesn't come back from the seller. This is a catch 22. What this means, is that if you loan the money to the buyer and get it back from the seller, the lender would probably have an issue with it. But get this, if you have an option on the property and loan the money, then in reality you're not getting it back. i.e. if you have an option for $80K and the buyer is purchasing for $100K and you are giving them 5% down or $5K, then the $5K is really a loss to you and you're not getting it back. And because you're assigning your option, you are NOT the seller. In all reality this makes this rule workable. And if the seller is actually getting money at closing too, you could argue your down payment assistance went to the seller.

 

That's a far as I'm going because I have a valuable niche with this. To me it's a tremendous trade secret and if you got it then great. You can work on the paperwork yourself. :)

 

4. What is considered a RESPA violation and how many people are doing completely illegal and fraudulent investing and don't even know it.

 

Just to talk outside of RESPA for a second, I have been seeing two very disturbing forms of "so called" investing in MI lately. One is the rental or lease options of foreclosed properties. The investor takes an option, rents or sells on lease option during the redemption period. What bothers me about this is that there is clearly an ethics issue because whoever bought the property at the auction cannot accept payment during the redemption period. I.e. the investor is pocketing all of the money and putting everyone at risk if there's an eviction too late. However, I have also see investors sell/lease option foreclosed properties without even having an option! And yes, they're going to jail.

 

The other is of course, a RESPA issue. Section 8 of RESPA says that if you are getting a fee from settlement, you must provide a true service. I.e. you cannot get paid a referral fee that comes out of the seller or buyer's pocket. Now, I have had attorneys tell me you can if you have a written contract with the mortgage broker that they will NOT charge the borrower from the referral fee. And further the attorneys have said that you must now show up on the HUD. And the correction is, neither one of these are legal. The attorney was wrong, you cannot get a referral fee PERIOD. How do I know this? From RESPA themselves. I have seen too many investors go into settlement with the wrong strategy and they are basically getting paid a referral.

 

So here's the cool part. I understand that option investing is a gray area quite often, but ask yourself your intention. This is the final part of this post and the most valuable. Are you using the paperwork to get around the rules, or are you using an option as an investment tool? If it's the latter, then you're on the right track.

 

I have done a tremendous amount of deals. I have done everything posted about in this thread. I have created and sold notes, flipped everything from cash deals to sub tos and so on. But the one thing that happens as you get further into this business, is you need to know the laws and guidelines of those you work with. Ignorance is no excuse. And from my findings here and what has come from this thread, is that some of these rules that are created are so disorganized that they are misconstrued.

 

As my attorney says; there's a difference between legal and creative. And it's a thin line.

Hopefully we all have a better understanding of why now.

Regards,

Adam

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FYI,

Walked out of closing yesterday with a $57,000.00 check. I was paid for the release of a promissory note that was based on my option to purchase and money I loaned to bring payments current for the seller. The Release and Promissory note were recorded. The bank was a Sub-Prime lender.

Regards,

Adam

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2. How to flip while creating a note and/or seller financing

 

Taking an option that allows you to create a note (land contract, deed of trust or mortgage) and assign interest.

What takes place is simple. We could argue that a sandwich lease option is the same thing because it has the value of seller financing. However, the note is not really being created just the terms are. So to stick to the issue at hand, I am going to explain how this can be done with the note buyer.

 

If a property is purchased at 60% or little more on the dollar, you may have the ability to create and sell then note. This could be done by controlling with an option and having verbiage in the option allowing for the creation for the note. i.e. buyer gives optionee the right to purchase the property at x % with x down and payments of x on a x year land contract with a balloon payment in x years.

What this does is allows us to have the option to terms. The terms can then be presented to a third party (buyer) and then once their credit is ran you can create your note and sell it to a note buyer for up to 85-90% LTV if the buyer's scores are high enough. (usually 600 or more) This method can also be done with a double closing so the buyer has no idea what you're making on the deal.

Advantage: In all honesty this is a cash deal because most note buyers are not affiliated with national banks such as Chase and Country Wide. You can do whatever you are capable of.

Hello everyone,

It's my first time visiting this website and forums(referred by someone who claimed gotten his start from Michael C.) I'm new to real estate and have only just started learning options/lease options and I don't quite get this technique of flipping or pretty much any other that was mentioned in this thread but if anyone could help me understand this better I would gladly appreciate it. :angry:

(I just don't understand what's in bold lol.)

Thanks,

Geovanni

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