You can get a letter from a transactional funding source before you make your offer, so you can submit it with your offer.
Regarding the earnest deposit, yes, you are going to need to come up with the deposit shortly after the offer is accepted. It's highly unlikely that you are going to get 10 offers accepted at once, unless you are offering too much. If that were to happen, and you couldn't come up with the money for the deposits, you could explain to the realtor(s) that you no longer wish to move forward with the deal because you got another offer accepted. They won't be too happy with you, but it's an option.
If you are still worried about it, just make one offer at a time.
Good luck,
Steph
J Scott,
You lost me here:
"The seller isn't assuming any liability in the transfer of title...that's what a title company (and title insurance) is for. Regardless, in a double close, there are TWO contracts, and the purchaser is a party to BOTH contracts."
There IS liability on the seller institutions part.
You mention that the BUYER is PARTY to both contracts? I assume you mean the purchase contract with the institution, as well as the sale contract from you?
How can the end buyer be party to YOUR contract with the institution and if so, you are joint purchasers and you are selling your right to your portion of the property.
I still see no banks contracting with TWO
separate parties to by one REO property?
It's also worth noting that in my experience, FNMA is the only major lender with such deed restrictions, and even FNMA will allow an immediate resale as long as the selling price is not more than 20% above the purchase price. So, even with FNMA, it is not a violation of the contract to do a double-close, as long as the price is right...
Jonathan,
What deed restrictions and/or lender stipulations are you referring to?
I don't recall any of the bank's addenda that I've signed require that the money from the purchase come from my bank account specifically. I can look through some of them now, but I don't think there are any stipulations as to where the money for the purchase has to come from.
If you could point me to the specific restrictions/stipulations, I would appreciate it.
Thanks,
Steph
Stephani,
Post one:
"I also appreciate the thoughtful response, but after reading it, I still don't see what part of a double or simultaneous closing constitutes fraud. I am purchasing the property from the lender, as is stated in the contract, closing on it, and then reselling it to the end buyer"
Post TWO:
"When we go to the closing table, they are required to sign a disclosure stating that they are aware that the property is being flipped and that their cash is being used to fund both transactions."
Which is it?
J Scott,
Post One:
"Yes, my wife is an agent, and specifically holds her license for the purpose of our business."
Post Two:
"I advertise to my buyers with an email, pictures and some basic information about the property. I give them an opportunity to view the property. And then if they want to put it under contract with me (AFTER I already have equitable interest in the property through an executed, binding contract with the bank), I provide them a state-based standard purchase agreement."
Which is it? I CA your wife would loose here license. You would face trouble, as you are acting as a realtor. This I am not open to debating.
I think you folks need to keep doing whatever makes you comfortable, as were going around in circles with play I don't have time for.
Sorry to have provided such STUPID input in your OPINIONS! Geez!
J Scott, I understand your commitment to being right! You're selling a non state specific FLIP program! Good Grief!
Stefani,
Good grief, you're selling a FLIP program as well?
"Greetings Blogosphere!
I’m pleased to announce that my Flip This REO! eBook is finally available for purchase!"
Between you and Scott, who needs Lawyers huh?
Good Luck..
OUT!
Jonathan,
Where do you see the discrepancy?
Steph
P.S.
I'm the one selling the eBook, and in it, it states several times to CONSULT A LOCAL ATTORNEY BEFORE MOVING FORWARD.
P.P.S
I'm still waiting on those restrictions/stipulations that I am supposedly violating. If you're going to accuse me of doing something fraudulent and/or illegal, please be able to back it up with facts.
Stephani,
You're closing REO with OPM?
Did you tell the bank that when you entered into contract?
You stated you closed and resold. Then you stated you closed BOTH transactions with OPM.
This CAN be sticky and I have been institutions council on a large scale.
Good luck. You have council, so go with that.
I do like the format of your blog and you seem like a straight forward person.
I can't spend the time with endless debate though.
P.S.
California is actively investigating all things related to RE, as fraud is rampant. As I stated, there are a TON of investors, banks, appraisers, lenders who have been affected.
90% of the strategies I see in e-books and coming from "gurus" non state specific are troublesome.
Best,
Jonathan
Hi Jonathan,
Trust me, I do not want to end up in court, which is why I consulted with an attorney from the very beginning.
If I was advised that what I am doing was fraudulent or illegal, there's no way in heck I would be doing it just to save a few bucks on the cost of borrowing money.
To answer your question- no, I do not disclose to the bank that the money is coming from a different source, nor am I aware of anything in the contracts that I sign that states that I am required to do so.
Regarding the statements that I made in the prior post...both are true- I do close and resell the property, AND I am using the end buyer's funds to fund both transactions.
I do understand that there are a lot of people getting in trouble these days for "creative" real estate deals, but I have been advised by my attorney that I am in no way violating any laws. If the laws change, I will be the first to adjust my strategy,
Take care,
Steph
Which is it? I CA your wife would loose here license. You would face trouble, as you are acting as a realtor. This I am not open to debating.
No, I'm not acting as a realtor...my wife is. When I say that "I advertise..." I mean that "My business advertises..." and my wife is a principal in the business.
So, my wife is acting like a realtor...which she is!
On what grounds would she lose her license? Is she not allowed to purchase the property? Is she not allowed to market a property that she has equitable interest in? Is she not allowed to sell the property? Which part specifically is prohibited?
As usual, you make wild claims, but provide no detail to support those claims.
You said at the beginning of this that it is ILLEGAL to wholesale REO properties...and multiple people have asked you to provide the specific statute that prohibits this activity.
After much back and forth, you then went on to admit that it is -- in fact -- not illegal (despite your original contention), but violates REO contracts.
Now you are being argumentative about other points that are completely unrelated.
It's that anyone here isn't appreciative of your opinion...it's just that bad information is worse than no information, and people here have livelihoods that depend on this info, so getting accurate information is essential.
I'll point out one more time that, as a lawyer, if you believe something is illegal, you should be able to provide a statute that supports that claim. You wouldn't allow another lawyer to tell you something is illegal without knowing the statute...why don't you provide us the same courtesy...
You've yet to do that, which makes us question whether the information you provide is accurate or inaccurate.
Sound good..
"To answer your question- no, I do not disclose to the bank that the money is coming from a different source, nor am I aware of anything in the contracts that I sign that states that I am required to do so."
The banks are not asking for 100% financing approval, and down payment in escrow?
You seem to be representing that the funds are coming from your lending source to the bank, not the end buyer?
That's where I have seen problems occur in CA.
Please verify your information before you throw around accusations...
Opening arguments and closing arguments are nice (and exactly what you're doing), but it's the stuff in-between (the EVIDENCE) that wins cases. Please provide some...
J Scott,
Your livelihood in part, seems to be selling an REI coarse that indeed would NOT be able to cover legal issues in all states that the purchaser would apply the material.
This has caused more legal trouble for folk's following REI investing programs than you would know.
You say you have legal council, so that's what is important to you, or any investor.
I can not quote, as I said, any number of legal issues in your state. There is NO secret that there are many!
I can not find consistency in your many posts, and you clearly
are defensive of mine, so let it rest. Wholesaling REO's CAN present legal issues!
Do this, go to the public Legal site:
Findlaw.com
Go to YOUR states statutes in regard to Real Estate Transactions. READ UP! That should keep you busy for a while and could very well be an eye opener for you.
For you to insinuate that I somehow have ill intent, or am not versed in my practice is counter productive. I feel that you are on the defensive and missing the point of my input entirely.
My cautionary legal information does not affect your livelihood, but could save some newbie investors who follow your, or any other REI course information, form trouble.
After reading this thread, I must say that it has been enlightening. That said, while I think the back and forth has been eye-opening for myself and I'm sure anyone else, I do want to reiterate that we're here to talk about real estate, not to bash one another or to accuse one another of things.
You're welcome to debate the legality of flipping/wholesaling REO properties, but I don't want to see any more nastiness thrown around.
Please be respectful to each other.
Thank you.
If it's more convenient, feel free to use statutes from your municipality as opposed to mine...
I apologize if I'm being skeptical, but I am...
Josh,
No intent in any nastiness here on my end. I am a litigator and investor with very thick skin. I have no problem with the hostilty pointed towards me.
If I somehow offended anyone I do apologise. As I stated, my intent in posting was to bring to light potential issues, not debate anyone specifically.
I can not post cases and or codes, and how ther apply to the discussion, as that would be giving legal advise, and I tried to express that with no avail.
I do get frustrated when a client gets into a situation as a result of trying some "creative deal," learned from an Internet course.
So, on with a civil discussion...
Jonathan,
I am making cash offers, and providing the bank with a bank statement from a private lender as my proof of funds. I usually give the bank 1-2k as an earnest deposit.
Like I mentioned, there is nothing that I am aware of in the bank's addenda that states that the cash for the purchase has to come from the same source named on the proof of funds letter.
If you have information to the contrary, please share it with us.
Steph
Stephani and Scott,
Respectfully, if you are covering yourself, fine!
I see a lot of newbies to investing in RE, following "creative" advise and ending up with problems. That it!
Lets move on and hopefully I can add something of value without this intense
personal debate.
There are limitations as to what I can post publicly, so I will put more thought into anything I post, with that in mind.
Once I post statutes, citations and or case law, and how this applies to a given issue, I cross a line that is not conducive.
Can you accept that? I hope so.
Again, sorry if I cased any frustration.
Well im not an attorney, and im in CA working on exactly what your talking about. I want to flip REO's and Stephs ebook is awesome by the way.
Since im not an attorney, I will post some links :).
Article from attorney on shortsales in CA that they CAN be done Just gotta do them right!!!
http://ezinearticles.com/?California-Home-Equity-Sales-Contract-Act---A-Mine-Field-for-the-Unprepared!&id=1095260
California civil code 1695 (was int he article, but cant tell if its changed since then?)
http://www.leginfo.ca.gov/
(click on "ca law" then check "civil code" then type in 1695)
THESE ARE ON FLIPPING FROM FANNIE MAE AND FREDDIE MAC ON FRAUD
cash out buyer
https://www.efanniemae.com/utility/legal/pdf/fraudnews/mortgagefraudnews0709.pdf
Property flipping
http://www.freddiemac.com/singlefamily/preventfraud/flipping.html
Nothing in these show anything being illegal in california. A good title company I FOUND which is known on here already is "Old School Title" and they close deals in CA all the time that are REO wholesale flips.free info too.
oldschooltitle.com
Here is what i added to my contract for my end buyer on an REO and the addendum attached to the banks contract.
Addendum to Banks contract on REO
The parties hereby incorporate the following into their Purchase and Sale Agreement for
the property located at: ____________________________________________________;
1. SELLER hereby grants the Buyer and or their representatives all of the necessary rights
to immediately list for sale, market, negotiate and enter into a contract to lease or sell the
property immediately to a third party for a profit. All documentation in connection with
the foregoing will be made available at the Lender’s request.
2. SELLER and BUYER agree to use buyers choice of ______________________________ to complete their closing of the said property.
and for my end buyer on the contract..
4. CLOSING. Closing will be held on JULY 8, 2008, time being of the essence, at a time and place designated by Seller. Seller shall choose the escrow, title and/or closing agent.
5. This contract is contingent upon the successful closing of the sellers first transaction on the said property and contract dated ___________.
What do you guys think? I will be using seperate funds though not my end buyers funds because most title companies here wont accept that. There was only one place that would but she didnt deal with REO's.
Hi Dwight,
Glad you liked the book.
I would have an atty in your area look over your contract to be sure you have all of your i's dotted and t's crossed.
It will cost you some cash, but is something you should do before you dive in.
Steph
Great conversation.
Thanks Jonathan, Stephani, Scott.
FWIW, I always found having my opinion challenged either made my thinking better, or I needed to change my opinion.
To defend Jonathan for 1 minute, someplace it is written ignorance of the law is not an excuse. I know of a real estate guru one of the mid western states is after because a student misunderstood and misapplied his program. That misapplication is a violation of state code. They let the student investor off with a slap on the wrist if he publicly stated the source of his information of guru X.
I can give Jonathan the benefit of a doubt on the statute references. I suspect that as a non attorney, unsophisticated civilian having no legal authority or duty, I and can quote code and statute to my hearts content. I could believe that because he/she is admitted to a state bar, an attorney is held to a higher standard does not have the same freedom. Although every attorney I have spoken with prefaces this saying he can only speak to his local state as the law is different in every state and jurisdiction.
On the other hand, I wonder if Jonathan missed a couple of points Scott and Stephani were trying to make.
Lets say I am wholesaling a reo. I have contract "A" with the seller. I am also reselling to a 3rd party and have contract "B" with my buyer who is purchasing with either borrowed or his own funds. I am the only one in both contracts. (My buyer is not in my purchase contract "A" which I think Jonathan thought).
I can fund the buy side myself (contract "A"), then walk over to the next table to complete the (contract "B") resale, ie the double close. Lacking a deed restriction in my seller's deed, why wouldn't I be fine? Classic wholesale transaction.
Morph this just a bit, instead of my funds I use someone elses' funds, a mortgage or transactional financing. Unless something has changed very recently this has been fine. These were not simu flips, but I have almost always verified funds using my own funds and closed with someone elses' funds, ie a mortgage.
Stephani streamlines this by staying at the same table and using her 3rd party buyer's funds to close her purchase.
Jonathan is that the concern? Even though it is disclosed to the buyer that she is using his funds to fund her purchase, it runs afoul of some rule precisely because it is the 3rd party buyer's funds?
Or does the concern have to do with simultaneous nature of the purchase and sale, sort of assigning a contract with out the selling bank's knowledge? I know I've run into problems myself with this having the contract in my name then wanting to close in my company name.
I ran into a bunch of title companies that said it was illegal to not disclose to the bank your intentions and its illegal to use your end buyers money BUT come to find out by them later its more of a company policy and not the law. I heard about something in the escrow officers hand book or whatever they call it that you cant use an end buyers money but who knows because no page was given.
ONE lady in CA i talked to said she can do it all day long. we use "C" money to fund mine, then credit him back "X" dollars for his and the difference is mine.
also another agent said instead of dealing with a double close or simo, you simply can have them fund the deal as a loan then reconvey for a fee and they take title. Something like that.
as for the land trust idea he was talking about earlier. I talked to anthony on the phone and got exactly how he did it. Seems a tiny bit different from the post.
Basically its gies like this: (this is in CA, not sure about registering in other states) You have a land trust document with your LLC as trustee, and the benificiary "BLANK"
1. offer to bank is "LLC" (if thats what you use)
2. when accepted attached to the banks addendum that you want title vesting in xyz llc the trustee for privacy reasons. (some banks wont but rare)
3. find an end buyer and add them as the benificiary and have their money put in escrow for the deal.
4. you show up to closing since your the trustee
5. you and the end buyer meet up at the natary public and he fires you as trustee.
now i guess it depends on what you have in your trust agreement on who does what and how someone is fired, etc. He cant sell with you as trustee so obviously he is going to pay you off. I guess he pays you out of escrow but i think i would figure out a way to do it in a way the end buyer feels safer.
SOOO going back to what was said in one post something about being illegal doing this. I think this method has been around for a long time. and it has nothing to do with the banks contract. basically you are going in as partners and he pays you in advance to fire you. soo i dont understand how it would matter in the banks contract
Hi Dwight,
Civil Code Section 1695 et seq deals only with "equity purchase" ie: purchasing a property IN foreclosure.
Has nothing to do with short sale or REO contracts.
Being that you are here in Cali, I am sure you know the endless pitfalls and problems with these deals in Cali.
The odds are totally stacked in favor of the defaulted homeowner and against the purchaser. This presents major problems with a flip situation.
Investors in CA have all but stopped this strategy.
"Nothing in these show anything being illegal in California."
The words nothing and anything confuse me, as the articles talk about straw buyers, fictitious purchase funds, inflated appraisals, cash out at closing etc.
Exactly what went on in a massive scale in CA during the boom.
However none of this applies to the potential problem with a short sale or REO flip.
Best to consult with your Attorney as Stephani mentioned.
I heard a rumor today (from two different sources), that legislation is going into effect January 1st that will end short sale flips all together.
I haven't been able to verify this yet, though, so I have no idea if there is any truth to it.
Sorry to get off topic, Josh, just thought I would throw that in for good measure.
Steph