Suffolk, VA · Member since 2017 · 28 posts · 5 votes
Hello Bp,
Question, are title agents allowed to wrap FHA loans?
I came across a property that is in pre foreclosure status and seller is looking to sell. I want to wholesale it but not sure if a title agent can wrap a FHA loan for term of 5 years.
I really appreciate any feedback!
Thanks
Investor · Scottsdale, AZ · Member since 2016 · 1k+ posts · 885 votes
9y
@Quentin Forbes "Danger, Will Robinson, danger!" (Those of you old enough will remember "Lost in Space", the rest of you will just have to wait for reruns.) Wrapping an FHA loan in good standing is legal, but risky enough. But, wrapping a pre-foreclosure FHA loan is a recipe for disaster. Then wholesaling it is monolithically stupid. (Sorry, not being personal.) First, no Title company will insure a Wrap on an FHA loan. They can legally, but they won't. (for reasons too complex to go into here). Secondly, the risk of the bank carrying through with the foreclosure is very high. Third, the poor snoock who buys the wholesale'd FHA loan in pre-foreclosure probably doesn't understand what he is buying or getting into. When the house of cards falls, it is only a matter of lining up everybody who touched the transaction and suing each one.
Why not do things the clean way? **Bring the loan current**. Give the seller some travelin' money and do a Wrap or Subject To and treat it professionally? Have **reserves** to make sure the payments get paid or sell the property to a buyer. (Not being hard, just trying to keep you and anyone who reads this for the next 5 years out of trouble.) I have done a **LOT** of these and made my first mil $ doing this very technique. It works, it saves the seller a lot of grief and actually helps the market. Done properly, it helps everyone involved. Done improperly, well, just look up now disbarred attorney B radford B arneys who did bad & stupid things. I think he got 30 months for it.
So, please either seek help from someone with experience in these complex transactions or don't even touch the transaction.
Suffolk, VA · Member since 2017 · 28 posts · 5 votes
9y
Ken Min Jonathan Damon thanks for your input! Yes that's exactly how I want the transaction to go "the clean way" and professionally. I plan on using the end buyer funds to bring the mortgage current and give some money to the seller at closing. Keep the deed in the seller name for 2-3-5 years. Once that year is met then the deed will transfer into the end buyer name.
I basically will play the middle man, once I assign the contract to the end buyer then I'm out.
Is that considered "the clean way" Ken Min ?
And doing it that way, will the title company still back away from it?
Ken Min Jonathan Damon thanks for your input! Yes that's exactly how I want the transaction to go "the clean way" and professionally. I plan on using the end buyer funds to bring the mortgage current and give some money to the seller at closing. Keep the deed in the seller name for 2-3-5 years. Once that year is met then the deed will transfer into the end buyer name.
I basically will play the middle man, once I assign the contract to the end buyer then I'm out.
Is that considered "the clean way" Ken Min ?
And doing it that way, will the title company still back away from it?
So long as the deed says in place the bank doesn't care. If it were me I would sign a purchase agreement with money held in escrow till I double closed. Make sure you get a nice EMD from the buyer because if he walks in that 5 years your on the hook. These types of deals are complex so make sure you understand what you are doing and protect yourself. Good luck!
Investor · Scottsdale, AZ · Member since 2016 · 1k+ posts · 885 votes
9y
@Quentin Forbes Get a Title report from the Title company. Not a Title Insurance Policy, just the report. Might cost $50 to $60 dollars. Take a look and see if there are any other liens and see if you are dealing with the "actual and only" owner and not some relative or scammer. In pre-foreclosure, there oftentimes other liens as well. Then have the owner order a reinstatement amount for the loan. Find out when the sale date is. Ask your escrow company if they will do a double closing under the circumstances you are wanting to do it and if not, what components do you need to change.
So, figure out the ARV, subtract the principal on the loan, subtract the reinstatement amount, subtract any unpaid property taxes, subtract any unpaid HOA fees, subtract any "special assessments", subtract and other liens of title, subtract legal fees, subtract closing costs, subtract traveling money to the seller, subtract any rehab you have to do, subtract carrying costs, subtract selling costs and fees, subtract real estate agent fees if any, and see how much is left. Usually by the time someone gets to pre-foreclosure, they owe more on the property than it could sell for, but that is not always the case. The math is as important on these as anything else.
Yes. I've wrapped a commercial loan. Residential loan. A expensive second. An SBA loan.
You name it. I wrote an article about what I learned. Mostly as a way to have all the common questions answered in one spot. I'd direct people to my article when I started talking to them about wraps (as most people knew little)
I've posted links to it here before but it was removed as "advertising" (wtf ever, I don't come here to sell anything and my link was educational).
Anyway what I wrote was years ago. I'm sure at this point google will give you better info than I could.
Your a braver man than me to wrap a commercial loan. I'm guessing DOS was upwards of 100k.
Not sure if it's braver or stupidity. But it's worked for me so eh, what can I say.
Investor · Scottsdale, AZ · Member since 2016 · 1k+ posts · 885 votes
9y
@Scott Matthew C. I haven't done any new construction but an article recently stated that the valley needs about 150,000 new apartment units. I'd think there is a lot of money to be made in the valley being part of that expansion. I stick to what I know (subject to, wraps, land contracts, lease options, seller financing) just because I've done those for so long and it's hard to teach and old dog new tricks. ;-)