All Forum Posts by: Divina Maruca

@David C. and @Ned Carey

If you read the Ohio case I posted, although there were charges that the investor could not represent his own corporate entity in court, the main reason the charges of practicing without a license were brought were due to the investor approaching homeowners to transfer properties to his entity "subject to" the mortgage, then his entity failing to pay the mortgage.    

Due to homeowner losses in credit standing and bankruptcy, these homeowners complained and the Ohio Bar saw that because he prepared the documents for signature by the homeowners, the Ohio Bar could find he was practicing law without a license because he had prepared the documents for the homeowner's signature.  The Ohio Bar likely INFERRED that he gave advice, even though he could have easily have said, "here are documents, please sign them." - which of course is no legal advice.  But remember, Courts and Bar authorities will INFER based on the homeowner's statement, not necessarily on what actually took place.  (I speak from my own difficult experience here.)  And in addition, ALWAYS GET A SIGNED STATEMENT AT CLOSING THAT THE HOMEOWNER WAS ADVISED TO SEEK LEGAL ADVICE AND EITHER DID GET SUCH ADVICE OR WAIVED GETTING SUCH LEGAL ADVICE AND THAT THE INVESTOR PROVIDE NO LEGAL ADVICE OR LEGAL ASSISTANCE TO THE HOMEOWNER.    

Frankly in other states, such as Florida, when you don't pay the underlying mortgage its called "Equity Skimming" and you can be charged with a felony.  Most states don't have this "equity skimming" law so they seek other means to go after a "wayward" investors who don't pay underlying mortgages, such as in the Ohio case.  

This is a good argument for ALWAYS using a title companies to close ALL your deals; title companies are usually ran by a local attorney.  In other words, NEVER CLOSE AT THE KITCHEN TABLE!!!  Spend the extra to close with a title company.  And while you, as the investor, could prepare sample documents for the title company, which could then be reviewed by the title company's staff attorney to review and use as their own, at least this puts the investor at arms length (at least as best possible) from the homeowner.  And don't forget that legal waiver.  

Again, authorities will infer whenever possible to get the conclusion they are seeking.  Know this.  Plan for this.  Always do business with this mind.  Protect yourself.  

Divina K. Westerfield, Esq.

Indiana Bar No 2095-49 

Be careful!  Even a skilled real estate investor can get themselves in trouble, and sometimes solely because they prepared their own documents.  Here is a link to an Ohio case where a real estate investor was found to have practice law without a license when he prepared documents used in his OWN transactions.  http://www.scribd.com/doc/237528735/2014-Ohio-515-...

As an attorney, I don't agree with the decision, but you must know there are always eyes watching, and from what I've heard about California, its even more onerous.  So while I believe in freedom of contract and having the freedom to do it yourself - whether good or bad -  the State may see it from another viewpoint.  

Divina K. Westerfield, Esq.

Indiana Attorney 2095-49

Can't give you legal advice in Florida.  (Have to say that because they watch other attorneys)  As a Florida investor and buyer of notes, I will tell you that you need to run a title search on the property to discovery what liens exist.  You'll have to make sure all those liens are resolved, particularly the mortgages.  Florida does have an anti-Equity skimming statute - be careful if you take ANY property there and not pay the underlying mortgage as it is a felony.  (Guess who got that piece of legislation passed - the banks).  In most cases the bank can't sell you the mortgage because its been sold off to a mortgage-backed security and they may not have actual control of it.  Its probably the hardest thing to do and I've tried many.  It works ok with commercial property, but residential is another story.  Run that title search - and start there and see if its worth it.  If you can't buy the mortgage notes cheap cheap cheap, its not worth it.

Timothy - 

I'm local to your area - live in Anderson/Chesterfield just down the road.  I'm also a licensed attorney in Indiana and have only practiced in real estate for the last 11 years (out of 30), during that time I've also been an investor, note buyer, etc etc.  You can give me a call directly just to talk - no charge unless we meet.  317-845-9338 (call/text/fax).  I've got several suggestions.  I taught about 600 attorneys in Florida, New York, etc how to fight foreclosures, so I'm pretty knowledgeable about what you need to do.  My website is www.SueTheBanker.com which also has many suggestions, although we're not as focused on foreclosures as we were several years ago.  Look forward to talking to you. (P.S. Only Indiana residents are invited to call - sorry, can't help the whole world and believe me it seemed everyone was calling before.)

The laws have changed where you may advertise your pooled investments that are targeted to accredited investors, but you must be very careful that you follow the new law.  (See the JOBS Act of 2012, the part of which we're looking at was effective in September, 2013; the crowdfunding aspect is still waiting final rule approval by the SEC)  Jon was correct when he said you pool money, you sell securities and have all the duties and obligations that entails.  

If you get more than one investor for one property, consult an securities attorney to structure the deal.  Some times your investor will already know how they will structure the deal and may require their attorney handle it.  

In any case, you need to better understand raising private money before you get yourself under the radar of state and federal authorities.

Divina K. Westerfield, Esq.

Also don't forget your nonprofits like Habitat for Humanity that build houses.  We foreclosed on a mortgage note of a tear-down property.  Habitat ended being our buyer.  We also were able to get the lots split before selling, so we sold it as two lots, instead of one.  Not a bad deal.

Divina K. Westerfield, Esq.

This is when large deposits (why not ask for first, last and double security) and automatic payments work.  If she's held a banking account for awhile, there are many automated payment systems to help her keep on track with this.  And get daddy's guarantee or get him to pay the whole rent up front, and he can collect from daughter. Why throw away a good paying tenant when you can just work with their weakness.  

I know a billionaire (honest to God!) that has poor credit because he pays cash for everything.  One of these days we'll see that credit worthiness, at least in the eyes of credit bureaus, isn't that accurate for some people.  Who said mortgage-backed securities were AAA investments and rated them highly?

Where there is money your motto should be, "Let's figure out how this can work for both of us."

Divina K. Westerfield, Esq.

You could write a note in second position on your properties (your ownership interest in the company, mortgaging over a balance to you), but these second position notes are severely discounted when you try to sell it for cash on the open marketplace.  You'd likely give away 40-60% of your equity just in the discount.  I would not recommend it.  

Instead, try to pay off first mortgages so you have a free and clear property.  Then get a first mortgage from a normal lender on that property to free up more money to invest.  You won't be selling yourself short that way.

Divina Westerfield