All Forum Posts by: Jeff Rabinowitz

@Bryan L. , the buyer can specify the title company in Michigan for most transactions as it is the buyer who generally pays the closing fee. Here it is the seller who generally pays for the title policy to insure good title. The buyer must only pay for a lender's title policy if they need one (if they have a lender and their lender requires one). I usually choose the title agent when I am the buyer.

I suspect the buyer could choose the title agent even in an REO transaction but there would be a lot of pushback. When I have been a buyer of an REO I always closed at the bank's title company and all of the borrowers I have funded have done the same. The deals must be exceptional (and have been) to put up with the bank's control of the process and to deal with title agents who can be difficult at best.

@Bill Gulley , I agree that there should be not be an issue with the title company paying the amount funded which exceeds the purchase price to the buyer (borrower). However, as the title agent is specified by the bank in REO transactions I have found it easier to write a first and second mortgage than to try to convince the title agent of their error and jeopardize a very attractive purchase for my borrower. Whenever I have used this strategy the term of the notes was less than 6 months and both of my liens were removed when the home was rehabbed and resold.

@Bryan L. , many of the purchases I have funded as a private lender were REOs and I have never seen this as an issue. I usually invest through my IRA and simply direct the IRA custodian to wire funds to the title company that is closing the transaction.

The title company has balked a couple times when I agreed to fund more than the purchase price (I don't do that very often). This issue was solved by arranging a second closing for the rehab funds (secured by a second mortgage).

Land contracts are common in Michigan. Yes, I have sold property this way. For my transaction, I as seller executed a deed transfer (warranty deed) which was held in escrow to be released upon the buyer's successful completion of the terms of the contract. The buyer made all payments due and the escrow company released the deed to them. In my case, the buyer died and it was the buyer's estate which paid the remaining balance on the land contract in order to sell the property and capture the equity.

Before Dodd-Frankenstein (when I was on the sell side of a transaction) creative financing meant offering scenarios where I would help my buyer with the financing. Usually it was carrying a land contract, or offering to, for all or a portion of the price due after a significant down payment was made or my sale price target was agreed to. Occasionally, it was offering a lease with option to buy. Unless my buyer is an investor and is not intending to occupy the property these scenarios are no longer on the table. Even if the buyer is an investor I would hesitate to use them now. (I had one borrower who moved into a property after giving written assurance that it would not be their residence).

When I am lending, creative financing means trying to find terms that will fit my borrowers project. Is a balloon payment appropriate?, if there are payments required will the project support them?, is the term long enough to allow completion of the project? Is there a way to fund the project that the borrower has not considered? For instance, I have been approached by several borrowers about funding deals they are planning on bidding on at courthouse auctions. I have never found a way to draw up this transaction since the price is unknown and the likelihood of a successful bid is small. When the bidder has owned other properties with equity I have been able to reach terms on the existing property that would let the bidder attend the auction confident that funding would be available should they place a winning bid. (This was a complicated process and the bidder was not successful anyway, as I had thought. I would be unlikely to do this again).

Essentially, creative financing is considering situations that the banks and institutional lenders will not.

You may be able to find a private lender to fund a cash out mortgage on the rental property. If the LTV were low and the rental income covers the payments it might not even be that hard to find someone interested. If I were looking at such a deal my main concern would be the exit strategy. A self amortizing loan would would provide an easy solution. Rates and terms can be anything that you and your new lender/investor agree upon.

Before you blow your credibility shopping your deal around you must be certain that it is truly a great deal. How did you find it? If it is on the local MLS keep in mind that hundreds of investors have already seen it--it may not be as good of a deal as you think it is. if you are certain it is a great deal it is rarely difficult to find buyers who will be interested.

Property buyers are usually listed on public records. Look for people or companies who own multiple properties in the area that are similar to yours.

Your charges don't strike me as unreasonable. I am surprised the tenant hired a lawyer over $450.

If the tenant wishes to collect they must get a judgment in court. If they proceed you will have notice of the court date. At that point you can offer a settlement if you would like or just go to court and let the judge or magistrate rule. It will probably be a small claims case so it is up to you to decide if it is worth your time to attend court. If you have never been to court and the case falls on a day that is convenient for you it may be instructive to go and see how things work. I have never been to court where there isn't an attempt to have the parties work out a settlement before the case is heard. If no settlement is reached the magistrate will make a ruling. In Michigan one can appeal a small claims court decision if they would like and there aren't even any court costs if you are the defendant. I would imagine you wouldn't bother with this but if you plan to be a landlord for any period of time it really makes sense to see how your local courts function.

Why would you wait to send the letter? If you want them out now and are willing to offer cash for keys send the letter now. Your problem ends as soon as the residents vacate.

Screen the tenants before you purchase the condo. If the tenants refuse to cooperate they may be telling you everything you need to know. If you decide you don't wish to keep these tenants have the seller evict them before you close the deal. Why make it your problem?

If you do decide to keep the tenants you should be credited with the prorated rent whether or not it was collected for the month you close in addition to the security deposit. If there is one, you should also get a copy of the move in checklist/inspection. It will be difficult to prove any damages without it. Of course, it would be prudent to document the condition of the property when you purchase it as well.