BiggerPockets

A few days ago I posted a thread regarding a recently Found SFH that is bank owned. that I was looking for stratgey in. It went unanswered, but it has had my wheels spining. I have since found possible routes but hey are not cheap. I connected with one of the LOC brokers mentioned on the board and they offered terms that would allow me to move forward with the proect, but as all of you are aware, they are not cheap. I am stil trying to do this deal, but don't want to give up most of the profit. After reading numerous posts on the board, I came up with the following scenario and am looking for feedback, positive or negative,Let me know what you think.

Here are the details again:

REO owned house that was previously purchased by a rehabber that went belly up. It still needs to be completed. The bank will only entertain cash offers. Asking 139k. I was thinking of trying to do a double closing on this property. The "A" purchaser would be my LLC and the end purchaser would be Me via a 203k loan for the purpose of primary residence. To avoid all the costs associated with purchasing this home via a line of credit, I thought I could try a transitional lender, and avaoid all the double closing costs and LOC costs via. Does this have a chance of working?

I actually do want to live in it. I know I can do the LOC, but it's not cheap and that is why I was thinking of doing a double close using transitional money.

I would be very careful in your plan of the double close and A is your LLC, etc. I am no attorney, but it appears like loan fraud.
Buying a home at $139k and re-selling to yourslef with bank financing for $203k would appear to be an attempt at loan fraud.

Why would it be loan fruad? My LLC is a legitamate seperate entity, and I would be buying it with a 203k loan (Renovation loan) not for 203 K. The property needs work and won't qualify for a conventional loan and the lender does not wnat to deal with renovation loans, so I can only buy it for cash. I do not have the cash, so I would try to use a transition loan to buy it with my LLC and then have myself buy it for 139K + renovation costs from the LLC, hence the 203k loan.

On the flip side of the coin, why does it matter what price the LLC purchased the property for as long as it appraises at the selling price? It shouldn't.

Mickus,

I an not attempting to state that you are trying to commit fraud, simply what J Scott stated, it would give the appearnce as such. Since the owner of the entity is the same as the buyer, you, they would construe that as an attempt to finance a larger purchase price.

Why not just get a acquisition and rehab loan right out of the gate for the $203k?

Why would it be loan fruad? My LLC is a legitamate seperate entity, and I would be buying it with a 203k loan (Renovation loan) not for 203 K. The property needs work and won't qualify for a conventional loan and the lender does not wnat to deal with renovation loans, so I can only buy it for cash. I do not have the cash, so I would try to use a transition loan to buy it with my LLC and then have myself buy it for 139K + renovation costs from the LLC, hence the 203k loan.

On the flip side of the coin, why does it matter what price the LLC purchased the property for as long as it appraises at the selling price? It shouldn't.

that is correct...in my expereinces in those situations eventhough the bank asked for cash they would take your approval for the 203k financing as such.
get them an offer with an approval letter or commitment from your fha 203k lender and you will more than likey get 30 days in which to close. you can further increase your chances by offering to close quickly and a good faith depoosit...but you wil have to go to your lender and fet your financing together.
they will take the money they just don't want to wait for it.

Where I live, greater than 50% of all offers made on REOs with FHA financing fail to close.

Banks understand this, so they are oftentimes hesitant to allow non-cash (or non-conventional) financing. It's just a way to keep the property from being tied up in due diligence and then likely falling through...

That sounds very likely also. Either way the bank is saying " Show me the Money!"