Real Estate Investor · Outer Banks, NC · Member since 2009 · 121 posts · 44 votes
I have a co worker who wants me to help her. Her and her husband are divorced the note is in his name only but they are both on the deed. She lives in the home he does not. They went through the trial loan mod but he did not qualify. Saxon would not accept payment today. They also said they would not short sale the house to her because she is on the deed. Can I negotiate the s/s buy it and flip it to her with out going up the river?
Real Estate Investor · Outer Banks, NC · Member since 2009 · 121 posts · 44 votes
16y
is there any way around it. She has 2 small kids and really does not want to move if at all possible. Can she quit claim it to her X hubby? will that make any difference.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
16y
Is just taking over the existing payments an option?
No idea how actively they check on what happens to the house. But fundamentally, if they do check, and find out she now owns it (or, is even renting it), they will come after you. Yes, it will be fraud, since you will have said the sellers are not benefiting.
The bank is willing to take the beating because its the best they can do. But they want the seller to share the pain. Unless she can make the payments on the existing loan, staying in the house is probably not an option.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
16y
Hi, if she qualifies for the loan on her own, why can't she do a purchase contract for the X's undivided 1/2 interest and finance it. If they have been in title over a year I believe it will be underwritten as a cash out refi and closed as a purchase.
I don't know how far down the chain anyone looks, but a straw man could buy it and let that person, who is under no obligation with the bank, sell or lease to her, the longer the next sale can be delayed the better. And, that depends on what the bank requires you to sign, how it is written, if you look to this as a means to accomplish your goal, selling to someone with the intent to facilitate a sale back to the owner could get you in trouble as well. If the bank simply puts the restriction on you, that may work for you. I'd suggest you ask an attorney in your area how such a transaction might be viewed.
But, why have payments not been made if she can qualify for a new loan? From a moral point of view, I'd want to know that before I assisted someone in that manner, did they breach the agreement, are they in the wrong here or did the husband mess up. I would have to consider the circumstances before I would get involved and circumvent the intent of the bank's wishes....is the bank being unreasonable? I would have to justify my actions, at least to myself. Bill
Real Estate Investor · Outer Banks, NC · Member since 2009 · 121 posts · 44 votes
16y
The situation is the husband is a dirt bag, not paying child support and self employed carpenter with no work. When they were together he was working and could afford the home. She went to see a broker friend of mine who said he could get her qualified for a new loan but not for enough to cover the existing loan hence the reason for the need for the S/S flip to get the principle reduction. She has already asked the lender if they would short sale to her and of course they said no. Would seem to me it would be in the best interest of the bank to get an appraisal give her a principle reduction and let her assume the loan with new terms.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
16y
Sorry, but you're missing the point. The banks going to feel some pain when they agree to the short sale. There will be a real loss for them. They want the owner to feel pain, too. So, while accepting a short sale is indeed in their best interest (sort of like splitting 8's at a blackjack table, you still lose, but it makes for a smaller loss), they're not going to let the former owner be the one to benefit from their loss.
If she can afford to make the CURRENT payments on the EXISTING loan, and has enough cash to make up all the back charges, she could "buy" the house from her ex subject to the existing loan. Really all he has to do is quit claim his interest to her, and understand the loan will remain open while she makes the payments.
But that does mean buying the house for more than its worth. No need to qualify for a new loan. There is a risk that the lender will call the loan at a later date, I would think she would have an argument she was an owner and therefore entitled to make the payments. She can point out they refused to short it to her because she was an owner and say they can't really have it both ways (though they could argue they can, since she wasn't on the original loan.)
If this situation needs a 20% short to make it reasonable, this is probably not the best course of action. If the value is close to the loan amount, though, and she intends to stay indefinately, it might be OK. The risk is that she needs to sell at some future date and would then either need to bring cash to the table or to negotiate a short sales.
If she wants a well priced house that fits in her budget she really should just buy another house. She can get away from this one with the ex taking all the hit. Moving's a pain, but its not so much pain that she should accept this crummy subject to deal just to avoid it. She has friends like you who can help with the move.
Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
16y
I like what Financeexaminer said, let her rent the place for a while. You or another investor could purchase the house and hold it as an investment for a couple of years. While Jon is right in theory that the bank wants to 'SHARE THE PAIN', the real reason banks do short sales is that they don't want to own another house and they want to cut their loses. But to give a twist to Jon's analogy, banks 'split 10's' when it comes to working with underwater borrowers.
If the bank will agree, get an independent appraisal and see if the bank will sell if for around that amount.
I remember as a Realtor, the WORST clients were divorcing couples. Man I hated that!!!!
Centennial, CO · Member since 2009 · 758 posts · 251 votes
16y
Dangerous ground here. We all want to be as creative as possible in structuring deals, but short sale approvals are very clear - no benefit to the homeowner. Renting and being able to stay in the house with principal written down by the bank is considered a benefit. I commend you for trying to help, and the bank may never know if she stays as a renter - but not worth the risk.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
16y
Ted, you have experience in SS, at what point do you think a homebuyer could come back a purchase a home they use to own? I don't think that a requirement of a sale from a bank can forever bar someone from future ownership.
I'd also like to hear what James thinks or other SS heavy hitters.
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
16y
You can not sell nor rent to the borrower until there is at least one single degree of separation. This is the basic letter of the law as it cannot address transactional separation. So, in essence, as an investor, you cannot buy a home and resell or rent directly to the borrower. You the buyer, will need to sell to someone else who in return can rent or sell to the original borrower.
In theory this could work, however, I have seen some approval letters with verbiage that the borrower must agree to permanently vacate the property, or the buyer must agree to not being or using a straw buyer.
In my opinion, it can be done legally, but I believe the risk is not worth the reward.
Real Estate Investor · Outer Banks, NC · Member since 2009 · 121 posts · 44 votes
16y
Thanks all for the help. Scott she is not technically the borrower she is owner by marriage Ex hubby is on the hook not wife. If she quit claims it to hubby then we do the s/s flip would that make it on the up and up. Ted I hope your listening in, you know you are my go to guy for funding. Or could just approach the bank and tell them exactly what we are doing and see if they will approve it, as it is there policy not to refi the home to her.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
16y
Thanks Scott, that's what I thought. Now, three yaers down the road, what recourse do you think a bank jhas if the restriction was not placed in the deed (by name which I doubt they can do that anyway) and the borrower was found to have purchased the property from a second or even third seller? I see this falling in favor of the homeowner down the road. What's the enforceable recourse three years after the fact?
Centennial, CO · Member since 2009 · 758 posts · 251 votes
16y
I have had someone tell me that there needs to be one year of seperation, but have never found anything to verify that. Scotts post, as usual, is correct regarding one "level" of seperation. The fact that she is not on the loan poses an interesting question, but she is clearly an owner via title. Maybe it is worth a shot to clearly disclose to the bank. I suspect they will not be very understanding, but would like to hear your take on that Scott.
Real Estate Investor · Ocala, FL · Member since 2008 · 742 posts · 463 votes
16y
Here is my opinion, since I was personaly asked.
Can it be done, in a round about way maybe.
Should it be done, no it is not worth it.
The only way, I would advise is to do the following: Get an Attorney involved. Get the Attorney to "act" as the Buyer and have the Attorney rent/ lease back to the wife. If and it is a BIG if, an Attorney is willing to be party, then do it. But, I would NEVER be a party in a transaction like this. (And I have been asked literally 100's of times.) Let an Attorney take the chance.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
16y
OK, I think I have a new opinion, I can do that, it's in my contract, lol!
I don't think the bank can make any restriction against selling to this person at all. They do not have a business relationship with them and I can't see their justification to do so.
What they may not do is agree to the amount of the sale and kill the deal. If the amount could be established prior to her making the offer, I think they would have no choice.
Look at it as if the borrower had died, a spouse who is married after the borrower signed the note has an ownership interest in the property but is not required to pay the debt. The spouse has the right to assume the debt, but is not required to assume the debt. Having an ownership interest in the collateral held by a lender does not creat an obligation to them and they can not hold her to the obligation, therefore, they can't insist that she suffer any loss arising from the debt.
That's my story and I'm sticking to it. Present that to the bank and see what they say. (After you get an acceptable price) Later, Bill
Lender · Fort Pierce, FL · Member since 2009 · 825 posts · 486 votes
16y
Applying Occam's Razor ... buy another house, have your daughter/gkids move into one of your currently owned properties or rent an apartment or other home.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
16y
LOL, I don't think I meant that as a theory, but rather shaving away the implication that the lender has a right to enforce it's vengence against someone who was not obligated to them under any contract.
If other issues were justifiable as pointed out above, I would consider doing the purchase and selling to her. The bank has the burden of showing that they suffered a loss from the lack of performance of a party they have no relationship with. She was never under any obligation to make a payment to the bank, he was. I think she has the right to protect her interest as much as the lender does.
I don't see the bank having an actionable cause against the party facilitating the sale to he either.
The bank has no leverage to compel her to sell her one half undivided interest in the bank's collateral. they can foreclosue and anyone can buy at the auction and immediately sell it to her.
Moving on is an option, maybe it's her best option, depends on how badly she wants to fight for her home. Bill
Lender · Fort Pierce, FL · Member since 2009 · 825 posts · 486 votes
16y
Bill, my previous point is just meant to point of the obvious.
The suggestions here are to find a third party (possibly a lawyer) to buy the property (possibly via short sale) and then maybe even a fourth party to buy the property so that the current owner (who may or may not have title) can then buy it or lease it and not have to move.
My much simpler solution is just to move. Wait until the current owner's financial position has improved and then buy a house.
No one here provided an answer as an attorney so to suggest ways to skirt the issue of having the current owner stay in the house and not benefit is splitting hairs ... frogs hairs at that.
The easier solution is just to move and hire an attorney to hound the deadbeat dad.
Investor · Hampton Bays, NY · Member since 2009 · 907 posts · 258 votes
16y
I would council your friend to get some help and go back and resubmit the request for a modification. If she can afford to buy the house from an investor and if her husband is agreeable they can use her income as a member of the household to qualify for a modification. If the property is so far underwater as to make a modification financially onerous than perhaps letting the property go into forclosure and attempt to purchase it as an REO. I dont know if this approach has the same legal restrictions as a short sale.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
16y
Originally posted by Kevin Yeats:
Bill, my previous point is just meant to point of the obvious.
The suggestions here are to find a third party (possibly a lawyer) to buy the property (possibly via short sale) and then maybe even a fourth party to buy the property so that the current owner (who may or may not have title) can then buy it or lease it and not have to move.
My much simpler solution is just to move. Wait until the current owner's financial position has improved and then buy a house.
No one here provided an answer as an attorney so to suggest ways to skirt the issue of having the current owner stay in the house and not benefit is splitting hairs ... frogs hairs at that.
The easier solution is just to move and hire an attorney to hound the deadbeat dad.
Hey Kevin, I didn't take it that way at all, I agree, they need an attorney and her best option is probably to move on. But if she wanted to dig in her heals and have a couple of investors help her out, at a profit I'm sure, she certainly has that option, IMO. Just making a point about the bank in what seems to be an unreasonable stance, however, the bank needs to get what they need $ wise, but they shouldn't cut her out as a walk off borrower either, she is not responsible, as that frog hair is split....LOL.
Real Estate Attorney · Aurora, CO · Member since 2009 · 21 posts · 21 votes
16y
I think John Holdman hit in on the head about the short sale and the relation issue. Theoretically if she was never on the loan you could quitclaim her off and sell it back to her, but if the bank finds out they can cry you misrepresented something and try to sue to undue the short sale.
I wouldn't do it, and as an atty I'd say you'd be hard pressed to find an atty to be the middleman as suggested by someone above.
Real Estate Investor · Outer Banks, NC · Member since 2009 · 121 posts · 44 votes
16y
I feel at this point it is best to get authorization and call the lender and find out what there true stance on the situation is, present them with the option of doing a loan mod/principle reduction or would they prefer to sale to an investor for all cash now with the written consent to sale the home back to the wife or option #3 foreclose and she buy it as a REO. They owe around $160K and there is a home listed in her neighborhood for $120K for 100+ days. I don't mind split hairs by the way. Thanks everybody for the help. I sent an IM message and invited Bill Bronchick to try and get a lawyers perspective