All Forum Posts by: Jerel Ehlert

Chpt. 91: applies to all tenancies.

Chpt. 92: residential tenancies.

Chpt. 93: commercial tenancies.

Chpt. 24: forcible entry and detainer (eviction)

Chpt. 24A: retrieving personal property

In many cities in Texas there are eviction services.  Anyone can represent anyone else in an eviction suit at JP, and as of last September, appeals to County Court.  They are usually cheaper than hiring an attorney, but you sometimes get what you pay for.  Go watch the 1st time.  

Landlords or property managers send out the notice to vacate, not courts.  3-day for non-payment.  30-day for other reasons (too numerous and not relevant here).  Compliance is strictly enforced.

Read the statutes under the chapters of the property code for landlord-tenant relationships.  

There is a lot of information you need to process to sell on owner financing, with a wrap, and do it right.  And by "right", I mean compliance with regs and avoiding trouble with buyer/owners down the road.  There are several posts floating around these forums.

Figure out what your criteria are.  If you are providing financing, do what a bank does and determine what your lending parameters are on the 4 C's.  Cash. Credit. Collateral. Cashflow.  Use an RMLO to check out the borrower.  They will also address some of your compliance issues under CFPB (Dodd-Frank) and Texas S.A.F.E. Act.

Sales price: Don't try selling for much more than what the house will appraise for (despite what some "gurus" preach).  Selling a $200K house (appraised) for $250K with $25K down looks a lot like fraud.  You don't get a premium in the sales price because you sell on owner financing.  Interest rate is your reflection of risk (risk = the probability that the return to the lender is something other than what is bargained for).  

Interest rate: if your interest rate pushes north of 8.5-8.75%, appraisal and inspection are no longer optional under CFPB guidelines.  That is called a "high cost loan" and additional  requirements kick in.  Some will say that if this is your first, you don't have to comply because there is a de minimis exception.  To that, I'd say if you are going to do it, do it right from the start because if you end up exceeding the exception, the first deal could violate the regs because it is a rolling 12-month look-back.

Loan Servicing: There are annual reporting requirements under state and federal regs.  Loan servicers will assist in compliance.

Closing/Wrap: Despite the legions of title companies, they are merely insurance agents.  There are only 4-5 underwriters in Texas that actually issue title policy.  Of those, there is only 1 that will issue title policy on a wrap transaction.  I can't speak for any other attorney, but my docs have been reviewed and approved by that underwriter.  Or rather, they didn't object to my closing docs.  Besides the deed with vendor's lien, note, and deed of trust, I have 40-60 pages of notices and disclosures.

This is just a taster, so I'd say find a local club and people who have already done this.

Placing the ad to sublet is probably enough to declare abandonment.  If tenant is paying monthly rent, why rock the boat?  But if not, you have a duty to mitigate loss.

Not sure what @Ronald Rohde means by "unauthorized".  The only significant change recently is that you must disclose that you are wholesaling the contract.  

When I was doing a lot of wholesaling, I opened title as soon as I got the earnest money contract signed to determine the state of title.  When I found the investor-buyer, I gave the title company the assignment contract.  Almost all of my contracts disclosed anyway (years before it was required).  Seller shows up and signs.  Buyer shows up and signs.  Title company mails my check (or however you want it delivered).

Your location is irrelevant.

There are several of us on here.  Keep in mind that, out of good, fast, and cheep you can have 2 out of 3.  i.e., you will pay extra for short deadlines.

The questioner is asking about doing owner financing TODAY, not 20-30 years ago.  Today, there is Dodd-Frank and CFPB.

If investors want to stick to the economic definition of FMV, you will get slaughtered in front of a judge and jury, who hate investors to begin with. Look at comps, another way of deriving FMV, and see if you would buy retail at that number. THAT is what I will crucify you with on the stand, and THAT is what matters.

If you charge a fee to prepare documents, that is the unauthorized practice of law.  There is nothing to debate.  Here is the legal opinion related.  Title companies don't stop you from breaking the law.  They only stop you from doing things causing the title company to break the law.  Just because they allow it, doesn't mean it is legal (or ethical).

And if you think all we do is "fill out forms" you are sadly mistaken.  Your lack of understanding is revealed in the advice you give.

There are people who teach what @Frank Adams suggests, but as a lawyer in Texas, I have sued investors that did just that.

1. Above market price: Sure, you can get a small premium, but that should have nothing to do with owner financing.  If you sell at 5-10%+ over market, that looks like FRAUD.  If the seller is putting down cash and the note is full market, in 5-7 years when they want to sell they won't be able to and you will be stuck with a borrower who will take out their resentment on the property before you get it back.

2. Meh.

3. Interest rate: This is where you adjust the terms for higher risk to the lender, not sales price.  Keep in mind that if the interest rates push higher than 8.5-8.75%, appraisal and inspection are no longer optional under Dodd-Frank and CFPB guidelines.  See you in Federal Court.

4. If the seller is an entity (LLC, trust, Inc., etc.), you cannot charge to draft docs. That's the Unauthorized Practice of Law - a criminal violation in every jurisdiction.  Officers of entities can draft for their company or entity (mostly), but still cannot charge this to others.

Close at a title company.

Use a licensed attorney to do legal work.

What you described can be done a couple of different ways, paperwork-wise. CFD or straight amortized 1st lien note/deed of trust. I doubt the seller has underlying financing because of the low dollar amount of the transaction, but if he does, a wrap note/deed of trust is possible.

CFD is disfavored for a couple of reasons, but can work here *because* you are not a consumer - bought for personal use. Raw land is hard to make a consumer purchase, so most of the negatives of CFDs under today's property code don't apply. Practically speaking, if you do CFD, just record it. Saves you from more $$ and headaches if it gets lost down the road (a common occurrence.).

Either way, there should be an earnest money contract, survey, and title insurance.  If you don't get those, that is a clear warning.  Doc review shouldn't be terribly expensive.  You can Google "Ehlert Law PC" to find me, or just about any other attorney licensed in TX.

Sure, attempt to talk to the neighbor first.  Make sure your survey shows the stamp.  If no response, have the monuments (iron posts surveyors use) marked, then demo and rebuild fence on your dime in 1 day.