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Need to assign agreement back to seller


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#16 Jonathan RexfordFL

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Posted 25 June 2006 - 11:19 AM

Title seasoning never comes into play. You are never on TITLE and as far as Options it has not been an issue for me. We are FHA capitol here in our area....lol.

We are always paid on seller side of HUD. So no respa problems there either.

I do not like Transcation Coordinator. Makes you look like a realtor.

Regards
Jonathan Rexford
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#17 Adam King (MI)

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Posted 25 June 2006 - 11:36 AM

Jonathan,
Not being on title is exactly why there is a seasoning issue. They know you're involved and want to know why and they want to hear a good reason. I.e. why is their money is going to you if you're not the borrower or seller. FHA does not allow options because they're freaked over illegal flipping. And RESPA wants there to be a reason/service that you're being paid for and to make sure it's not at the expense of the buyer. I talk about RESPA quite a bit because they're hitting MI with a hammer. I work with RESPA and HUD on almost all of my deals now making sure I'm in line with their rules. Better be safe that sorry.

However, I agree with everything you guys have said minus some of the option issues. Some Lawyers in MI say that no one can even do options without having a license. So you can see the confusion. I obviously believe this to be wrong. Bronchick even talks about this and his information is inaccurate as well. Although well intended, but misinformed

As I always love to learn, I would like to know about specific transactions that have taken place with as much detail as possible how you or other investors have been paid using your ideas. I would love to adapt them if they work. And for the record, I am as far away from being sarcastic as you can imagine. I am ALWAYS willing to learn because these issues are always changing!
Regards,
Adam

#18 Jonathan RexfordFL

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Posted 25 June 2006 - 04:02 PM

Adam,

Title passes from Seller to buyer. Sure we show up on the side of the HUD on Seller's side as a release. It is a condition of release of title. By the way HUD/FHA has know regulations in regards of options only when it comes to title issues.

RESPA is not a judicary body. RESPA is governed by HUD as you know of I am sure. There have been so many adoptions to RESPA since its inception since 1976. As a mortgage broker I get updates it seems every week of some seminar or someone going to jail because of RESPA violations.

As far as licensing its going to be a state issue. Dealing in option is where the realtor's are trying to bring an issue. But its still a law of doctrine with the held interest of an option.

I have always been paid a release fee from seller side of closing statement. I have used performance mortgages also. Even recorded memorandums. Never had a problem with FHA, SUB PRIME, or FNMA mortgages.

I am not talking about hypothical cases here. Real deals. Maybe you cannot do them in MI but it works in all other states I am working in. Even in MD where the HEAD HUD guy lives. I currently have a deal going there another Option.

I guess I have to come to MI to see what all the hoopla is all about (wife if from there)

The one I closed on Friday was a sub prime. Right on the closing statement was "Release Fee". That check was 26K and change. End of story.

Regards
Jonathan Rexford
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#19 Adam King (MI)

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Posted 25 June 2006 - 04:24 PM

Jonathan,
Are your options short term or long term? Just to clear things up (I think a lot of people should be reading this thread, because I think you and I are about to get into some great information for everyone to learn from) I am talking about short term "prime" loans. I agree with you about sub-prime (C credit loans etc for the laymen) loans where this is much less restriction.

The "RESPA" violations I was talking about was distributing funds after closing, or at closing. I.e. buyer getting their down-payment back when the bank thinks it's going to the seller.

I agree (And happen to love) your advice on the "release" issue, but we've come up with a few problems trying to do this with prime lenders.

What's you input on that?
Very cool stuff,
Adam
PS I'm may have to respond later to be a little more clear, I've had the kids all day. :mellow:

#20 Jonathan RexfordFL

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Posted 26 June 2006 - 05:30 AM

All of my options are short terms. Usually 90 days or less.

I agree that there are sorts of the kick backs at closing but since the money comes to me as a third party entity its been a non issue. You mentioned that PRIME loans. I am assuming that you mean FNMA mortgages.

Short term "PRIME" loans. Never heard of that loan product.

I will have to disagree with the scrutinity with subprime lending. They next to FHA have been hit the hardest with flipping fraud schemes. I have another transcation closing friday. Its with chase bank and I am being signed off as a payee on the hud.

Regards
Jonathan Rexford
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#21 Lexie(UT)

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Posted 26 June 2006 - 03:36 PM

Adam,

I think this is a great thread to that many could benefit from. Getting paid in the end is what we are all looking for, anyway!

With regards to this deal, there is no seasoning issue as I have held the option for nearly 2 years. Also, I talked to the Title company and asked them what they wanted, and they just said they needed a simple letter like Jonathan gave earlier in the thread and there would be no problems.

We will be closing in the next 2-3 weeks, so I will report back on what happens in the end.

Lexie

#22 Jason (AL)

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Posted 26 June 2006 - 07:38 PM

I like what Jim Mitchell (JimFL) said about using a Performance Mortgage to get
paid. Especially how to negotiate one with the seller, as well as explaining the benefits
of doing things this way.
He opened my eyes to the concept a while back about the concept.

I could post it if needed. :ninja:

Anything to help.

#23 Adam King (MI)

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Posted 26 June 2006 - 08:14 PM

Hey all,
Finally have some time to breath here. Have a ton of stuff going on right now.

Okay, first off Jonathan and I are saying the same exact thing. However, my communication in what I'm trying to say is totally off and I apologize for that. I was changing the direction of this thread into a "if you're putting money down etc." thread and that was confusing.

Here's what I mean:

I agree that there are sorts of the kick backs at closing but since the money comes to me as a third party entity its been a non issue. You mentioned that PRIME loans. I am assuming that you mean FNMA mortgages.


Yes. There have been serious FBI investigations in MI about the buyer getting money back at closing. This was the mistaken direction I took the thread into. I should have made that more clear.

When I talk about Sub Prime I am talking about the lenders themselves allowing such things as "true" seller seconds on such loans as 80/20. We are allowed to hold a second note as down payment on the 20%. If I walk in with a partnership agreement or non-recorded option with the seller for the 20%, the seller can close and assign the note to me after closing. This way if the buyer needs to put down a true 5%, we can make a 15% note. However, most investors and Realtors are doing it wrong by jacking up the price of the property. This is also a bad habit.

The true issue I was talking about was seasoning when you have an option (Say for 90 days or less) and are not allowing the bank to see it as a lien. In my experience with lenders such as Greenpointe, Chase and Countrywide, they have not allowed someone to step in with an option. However you say you're being paid on a release and that excites me. This is a practice that we have always performed but now because of all of the loan fraud in MI, I am trying to stay on the right side of the law with the banks. I would like to know what banks allow this with full disclosure etc. Staying off of the HUD is not something I want to do. I put myself out into the public too much to need to worry about this practice.

Some brokers are breaking the rules by turning options into other "non-threatening" liens such as a mechanics lien. This is illegal.

I think because you and I are LOs we should continue this thread with your techniques because no one ever talks about this. Actually, it kind of bugs me to see so many people only get half of the story on investing. It seems like when there's a bank involved most people teaching turn their heads the other way. That's why I like to see MC and people like yourself make the commitment to get the story straight.

Now, I also know this topic can never be completely fulfilled because there's just too much diversity between banks. I know all of our basic techniques work with cash, but people start to get creative just to get paid in an extreme Buyer's market. This is a pattern that I have seen gradually incline over the last two years here in MI. And I'm sure it's heading across the country.
Cool stuff,
Adam
PS Keeripes. I just read my prior posts and I hope I'm making some sense now. It's clear I need a vacation. :ninja:

#24 Lexie(UT)

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Posted 26 June 2006 - 08:53 PM

Adam,

Just to touch on one thing in your last post regarding banks...

I am not sure I see why a bank would care (or even ever know) about handling the payout to me using a this 'release' technique.

As far as I can tell, the only people that will ever know about this are the seller, the investor (me/us), and the Title/Escrow company. We are simply giving directions to the escrow company on how to pay the funds at closing The bank is getting their full payoff before any other checks are issued, anyway.

Does that make sense, or am I missing something?

Lexie

#25 Adam King (MI)

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Posted 26 June 2006 - 10:04 PM

Lexie,
I think that's a great question. But the answers that I have been given have simply been about seasoning. If you have not been on title for 120 days to 12 months, most banks want to know why you're being paid and why there's an inflated price to their borrower. This is why all REO properties do not allow this type of transaction. Other banks are weary about illegal flipping.

I am not sure I see why a bank would care (or even ever know) about handling the payout to me using a this 'release' technique.


That's my point. Doing something the bank doesn't even know about is an issue. We should be able to do real estate with full disclosure. Now, on the other hand creative and illegal are two things totally different, but can also be close in similarity. This is the topic of this thread.

I think this thread is heading into a powerful direction. Jonathan and others have no issue with this, but I continue to run across it during underwriting over and over. We can argue about it all day and the answer may come that it's an MI issue, but it's a fact. I have had a very hard time getting paid on options when I put them on properties for a short period of time and try to get paid by the banks.

Now, back to basics. This is a Sandwich lease option site and a CA site. There are no banks on CAs and SLOs usually go at least six months. I have not had issues getting paid when I have at least seasoned an option. That is, if I have recorded like MC talks about.

I am not trying to scare the hell out of anyone, just getting us prepared for what is.
Hope that helps,
Adam

#26 Gordon Holtner

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Posted 27 June 2006 - 12:07 AM

I am wondering if this could work to secure the payout on options investing such as Jonathan does for ex. the house fmv is 250 000 but you auction it and it goes for 280 000 why not just get a demand note for termination of the contract and get your money after the sale is closed directly from the seller? Can't the seller do anything with the money that they want after close?

#27 Adam King (MI)

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Posted 27 June 2006 - 01:57 AM

I think to simplify this conversation we can look at it this way:

1. I am making it a difficult issue based on getting money "put down" back at closing so from here on out we will stay focused on the topic at hand; getting paid on an option.
2. The methods here are good and workable with certain lenders.
3. Getting paid on an option or even from a short-term note, such as a claim of interest from a promissory note, release of agreement etc attached to the property will work, but may be an issue with certain lenders based on seasoning.
4. Everything works if you don't tell the bank what you're doing. However, if they find out later and didn't allow it, it may become a problem.

Can't the seller do anything with the money that they want after close?


Yes, and this goes under number 4.

I see people use power of attorney and other such documents to get paid after closing or at closing. Again, this is a title company allowance, but will the bank approve? That is the question that may never have a straight answer because of different lender allowances.

The last issue is where this thread has taken us. The best-case scenario is what is sought out here. What is the most "non-threatening" way to get the bank to go along with us getting cashed out on an option?
Regards,
Adam

#28 Jonathan RexfordFL

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Posted 27 June 2006 - 06:02 AM

Don't you guys SLEEP :)

Later on today I will take the last 6 deals and post the lenders that I have done these with. But I can tell you that I have done it with two of the ones that Adam has quoted. I guess we have different underwriters...lol.

I do not like the idea of a demand note because its a financing instrument. Just call an option and option. The title company has to clear the option in regards of title if its recorded or not.

Having a good team in place is what makes it run smoothly. Mortgage Broker, Property Inspector, Title Company, Appraiser, Surveyor, Insurance Company.

But of course it all starts with a buyer. These deals are very clean.

My experience is that a POA (used 3 times for flips) has to be approved by the underwriter. I have had them call the seller (one time) to verify the POA. I decided that I did not like that deal.

It really boils down to control. The last deal that closed on Friday had a snag. I will go into it later but I bailed it out in time. Nothing in regards of the option it was just the way the P&S was executed. I signed it as owner of record in seller blank and signed it as seller. Because I had the write to do as option holder.

There were 3 owners on this property....lol.

Well I have to get to the office :ninja:

Regards
Jonathan Rexford
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#29 Adam King (MI)

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Posted 28 June 2006 - 02:45 PM

But I can tell you that I have done it with two of the ones that Adam has quoted. I guess we have different underwriters


You know what, it all boils down to what you have said here. We ALL have right to get paid on an option and this discussion was about doing it from the lender's point of view. In all reality they simply don't want anything illegal to happen so that's why they get funky on creative acquisitions.

I can easily see I am changing my mind on certain routines even from the beginning of this thread.

There is a lot going on in today's world of creative real estate and we all simply need to keep our heads together to stay on top.

I personally do not need to see the deals you did because I truly believe with no ego, I have done or understand them all. It's just about getting the right lender to allow the right transaction. And most of the time it's the LOs butt on the line if they do something that isn't allowed by the lender.

Another point I want to make, is that sometimes you can create a niche so good that you will not want your competition know what you're doing. Not because they can steel it or even perform it themselves, but because of jealousy. This is what RESPA has told me as a fact. It's not doing something wrong that matters the most, it's the greed of others that will blow the whistle on you just because they can.

This is a difficult topic for sure.
Regards,
Adam

#30 #1investor_cream

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Posted 28 June 2006 - 11:14 PM

Hey everyOne
i know i have been M.I.A (missing.in.action) but i find this topic extremely serious
i have a question...
i have a pure option and we are trying to sell the house on a best offer takes it DEAL,
the offer is over the appraised value of the property for $25,000
how do we handle this extra money
seller asking $300,000
we started the bid at $310,000
appraised at 320,000
the highest bid was 345,000

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

Erik Collazo

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collazoerik@gmail.com


"Helping Others Realize Dreams, if They Choose to Realize Them."

C.R.E.A.M





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