Jump to content
The forums have been archived and are now read only. Years of great info saved for your reading pleasure. Thank you! Visit us on Facebook: https://www.facebook.com/NakedInvestor/ ×
The Naked Investor Forums
hassansr

Have any of your option fees been declined by a bank?

Recommended Posts

This hasn't happened to me yet, but has for a friend of mine. He was trying to get paid a $15k option fee on a simple $150k deal, but the bank funding the buyers loan balked on paying the fee even though it was to come from the sellers proceeds.

 

Have any of you had this occur? If so, how did you overcome it?

Share this post


Link to post
Share on other sites

Hasn't happened to me, either. Why is the lender involved in this? Usually the option fee is paid in advance, between optionee and optionor. Then the optionee moves on and exercises their option, one would assume. And that's when a lender would become involved.

Share this post


Link to post
Share on other sites
This hasn't happened to me yet, but has for a friend of mine. He was trying to get paid a $15k option fee on a simple $150k deal, but the bank funding the buyers loan balked on paying the fee even though it was to come from the sellers proceeds.

 

Have any of you had this occur? If so, how did you overcome it?

I've never had it happen to me personally but a friend of mine owns a title company and has told me about this sort of thing before. I am guessing the situation is just he has a simple option with the seller at $135,000 and has a buyer at $150,000. Or number roughly around that and the buyers bank as you said is not wanting to pay the extra $15,000 to some random dude in their eyes. I don't know any way around it. From what I have heard some banks will have a problem with it and some will not. Tell the buyer to look for financing from another bank would be my best option. Or have him speak directly to the bank and state his case. Both make sense. I'd try talking to the bank first. Sighting his equitable interest in the deal and his recouping of marketing costs, etc. Be careful using the word fee though.

Share this post


Link to post
Share on other sites

Is this pertaining to back end profit. I though title company is the one issuing this money. They cant touch this can they? :(

Share this post


Link to post
Share on other sites
Is this pertaining to back end profit. I though title company is the one issuing this money. They cant touch this can they? :(
The back end profit would be in a sandwich lease. In the case of a Pure Option, the profit is the difference between your option with the seller and your price to the buyer. In other words, your assignment fee.

Share this post


Link to post
Share on other sites

It has not happened to me yet but I do see it coming down the pike with funding non essiential funding costs in regards to the end buyer getting a loan. A good practice is to be paid before closing. Hence they are buying the right. Not the obligation. But if you have a large check you may want to do a double close and that way chain of title can just go to you and then to them. Bad part is closing costs.

 

Also you may want to consider who and where your buyer is getting there money. Stay with small local banks.

Share this post


Link to post
Share on other sites

I have been trying to figure this out for a while now and I have asked many underwriters about receiving money from an option at closing. Many of them have told me an option is a disguised FLIP and that, “Flips against FHA rules”. On the other hand I asked an underwriter today if a seller could receive marketing or staging fee out of the seller proceeds and I was told that was OK! A contractor who has done work for the seller and the seller agreeing to pay for contracted work that is ok. But the FHA underwriters are very cautious when it comes to dealing with an investor profits. Hope that helps.

 

 

 

http://www.fhamortgageprograms.com/

Share this post


Link to post
Share on other sites

This is just my belief here as its not tested with FHA. If you can go ahead and record a memorandum and wait more than 90 days on the option and then do the flip. Meaning let the seller and buyer close and you are just a release to clear title. Maybe even record a mortgage for the difference. Just an idea.

 

In the past I always got a release fee. Working with commercial banks (local banks) is a non issue. When we do Short Sale flips we actually do a double close. It gets expensive for the closing costs but it is a true close. Never had a problem there either.

 

These are just random thoughts.

 

Thomas it was good to speak to you today. We will be in touch for sure with FHA stuff.

Share this post


Link to post
Share on other sites

The way I've seen it done is either Contract Rights or Unrecorded Liens. Either have standard lines on the HUD-1 and should be acceptable to a bank.

Share this post


Link to post
Share on other sites

×
×
  • Create New...