Funding a foreclosure

23 Replies

I have recently found a foreclosure property and am in the process of getting Proof of funds and my down money together.  I have been trying to figure out a way to fund the project without running into any tax problems later on down the line.  I am going to be the one handling all of the aspects pertaining to the property.  But I have two family members that are going to be investors and pool their funds together to purchase the property, but they want to have the title in my name so that when the rehab is done and it is sold, or if I decide to refi out and pay them back and keep it as a buy and hold they won't have to worry about doing anything.   What would be some thoughts to structure this project in the best way possible.

Land Trust with you as the trustee, if you refi out and hold you make yourself the buyer and take title in your sole name.

Have an attorney draw up the paperwork and you can use it over and over. We title things left and right using our normal land trusts. It is just the initial cost to get it drawn up that might deter you but once it is done once it is done until the laws change and you have to have attorney make it conform again. For example if the properties address is 123 ABC Rd we would title it as 123 ABC Rd Land Trust Dated (date of purchase) with Blah Blah Blah as Trustee.

To be clear POF is for a cash purchase, the Buyer's cash, not a financed purchase, HML or otherwise. "Down money" indicates a loan, so a loan preapproval will be required.

If I have already put in an offer on the reo and it is offered, can i wholesale it to the land trust if the offer is accepted.

@Wayne Brooks

He is talking about something along the lines of a FNMA property, "Foreclosure Sales" in Pennsylvania are actually called "Sheriffs Sales". Come on Wayne venture outside of FL and keep up. Ha!

Those terms make absolutely no sense. So let me rephrase and see if I even somewhat caught what you are saying. Are you asking that if you already have an accepted offer are you able to assign the property to the trust in order to take title in that name? If so just call the title company or agent and tell them you would like to take title in a different name than is on the contract. All this wholesale crap on here is ridiculous, assigning isn't wholesaling.

It will be a cash purchase. Proof of funds is proof that I possess the funds to cover the money, and down money/ EMD is held in escrow if my offer is accepted.

Assigning/Wholesaling. What ever floats your boat.  But yes. If my current offer is accepted can I just have a land trust drawn up and close in that regardless of who's name the offer is in and who is funding the deal.

@Marc Oister What @Wayne Brooks was saying is that your aren't actually purchasing "Foreclosure" you are actually purchasing an REO property that has already been foreclosed. He didn't catch that from your initial post and the only reason I did was because of my knowledge of foreclosure sales i.e. sheriff sales in different states.

@Marc Oister depends on if the seller will have a problem with it, but more than likely shouldn't have any issues as long as it isn't a requirement for the property to be owner occupied.

Got you @Parker Detweiler  

Yes its an REO that has already been foreclosed. Has been listed for 2months then price dropped and was pending, but funding fell through and is now back on market. So hopefully I can get it at a good deal.

@Parker Detweiler Yeah, I realize he's talking about a REO. Just clarifying POF is for a cash purchase, verses a financed offer. I always giggle when I see a "POF" from someone other than the actual buyer.

@Parker Detweiler Definitely not an owner occupied only situation.  Thanks for the insight on what to do.  Now time to find a good Real Estate lawyer in the Greater Philadelphia area

Hopefully everything works out.  The property attached next door has just sold for 95K and my offer is 41K.  3K under asking price.  Hopefully since their last offer fell through due to financing mine will be accepted.  After a walk through already, the only thing needed is flooring, paint and kitchen cabinets.

I always forget how cheap property is in other areas, $41,000.00 in Florida will buy you the most run down piece of garbage in the worst area. If you could even find something that cheap I wouldn't even be able to tell you where, I don't mess with anything that markets for under $200,000.00.

@Steve Babiak

Use a trust cert with it and doesn't matter what country or state, its done to keep taxes and liability easy nothing else. Some title companies may not know what to do, but thats going to happen anywhere.

I read "down money" as a down payment on a financed purchase, not the EM deposit....different terminologies, somewhere they call it hand money! But, most REO's won't allow assignments.

Yes….any qualified attorney should draw it up with the land trust.

Thank you @Parker Detweiler I will have to look into it in the morning.  I have a good attorney that I work with who shouldn't have a problem

@Marc Oister give your family members notes and mortgages against the property after you close. As long as there is no prohibition for refinancing in the deed that should work to secure their investments. Your attorney can produce a Joint Venture Agreement or an Equity Participation Agreement to cover the terms and distribution of profits. I would recommend having the attorney create fill in the blank agreement for you to use on other deals. Since I am not familiar with Penn State laws I can only assume that an attorney can draft a useful document within the confines of the law. 

Personally, I prefer land trusts, however, tax reporting and obtaining a tax id for a short term project would send me looking for alternatives. 

If you plan to continue doing more deals with your investors a formal business entity with the investors lending to the business and being shareholders or limited members may be a more convenient alternative to consider on future deals. 

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