Should I Be Concerned?

9 Replies

Hi everyone, 

I am new to the real estate game and have some questions on whether or not I should be worried about how this transaction went down.

I was brought on as a lien holder after the property was purchased, and I brought $50k to the table to do renovations. I was told by owner A that he bought the property from wholesaler B for $800,000. However, it has come to my attention that the deed for the property in the county records shows $700,000, not $800,000 as the sales price. The deed also only reflects the transaction being between seller "C" and now owner "A". B is not mentioned at all, nor is the $100,000 wholesale fee. Is this normal for a wholesale cash deal?

I guess worst case scenario, I'm afraid the wholesaler is making $100k under the table (which seems like a huge wholesale fee to me?) and there is something illegal going on here. But, the other layer to this is, does it even need to concern me? Am I exposed in any way legally as a lien holder if the wholesaler/seller/buyer did something illegal in that transaction? 

I also don't know how I could verify numbers (a.g. the amount paid to the wholesaler), since there is no HUD involved as it is a cash sale. What documents should I ask to see, if any?

Thank you for reading my complicated question!

Natalie 

Hey Natalie!

Did the new owner purchase title insurance? If so, don’t drive yourself crazy. Any legalities that spring will be handled. Whether a “wholesaler” was involved or not is irrelevant to any surprises you are worried about. The property closed so more than likely everything was up to standard.

Hope this helps, happy investing!

YUP most dangerous loan to do is a small second behind a large first for rehab purposes..  if it goes fine alls well if it gets botched the first one to lose is the junior position.. @Wayne Brooks   see a lot of folks not quite realize what they did.

@Gabe Amedee Thanks for your reply. I am not sure if the owner purchased title insurance, but I will definitely ask. It's good to know that if he has it, I can rest assured regarding the legal side. 

@Jay Hinrichs @Tom Gimer @Wayne Brooks Thanks for your replies. 

Yes there is a hard money loan in front of me for supposedly $800,000, but seeing the $700,000 in the deed makes me wonder if the loan is actually for $700,000? I tried to look up the lien amounts with the county, but it just shows the lien holders, not the actual amounts. 

I understand the inherent risks of being a subordinate lien on a property, but that's not my question or concern in this thread. My concern is if it's normal for the $700k number shows up on the deed and not the $800k (aka that the deed would not reflect the wholesale fee of $100k) 

So far there is one winner in this deal... the guy who contracted at $700k, got paid and got out. 

It’s not uncommon for the deed to show the original sales price and for the assignor to be paid an assignment fee that is not reflected in the deed.  In some places these things will all become part of the record... but it depends who is involved and where the property is located. 

I would figure out the pecking order asap. You may be behind $800k or more which includes construction money. 

Originally posted by @Natalie Bull :

@Gabe Amedee Thanks for your reply. I am not sure if the owner purchased title insurance, but I will definitely ask. It's good to know that if he has it, I can rest assured regarding the legal side. 

@Jay Hinrichs @Tom Gimer @Wayne Brooks Thanks for your replies. 

Yes there is a hard money loan in front of me for supposedly $800,000, but seeing the $700,000 in the deed makes me wonder if the loan is actually for $700,000? I tried to look up the lien amounts with the county, but it just shows the lien holders, not the actual amounts. 

I understand the inherent risks of being a subordinate lien on a property, but that's not my question or concern in this thread. My concern is if it's normal for the $700k number shows up on the deed and not the $800k (aka that the deed would not reflect the wholesale fee of $100k) 

 it appears that someone made 100k already on the deal.. 

Late to the game here, but I can check on this for you if you PM me the address.

It does sound like a wholesaler was involved, and maybe there was a construction loan as well? Did the buyer (the person you lent the money to) tell you there was no HUD? A lot of cash transactions still go through escrow.

Also, sometimes lenders lend on the wholesale fee as well, usually around 10% of the purchase price.