15% over basis? - Posted by Savage

Posted by Tom on February 07, 2001 at 20:12:38:

I know that if someone wanted me to create a note to show that I paid $52,000 for a property that I only paid $29,000 for, BIG RED flags would go up all over the place. Sounds a awful lot like laon fraud to me.

15% over basis? - Posted by Savage

Posted by Savage on February 06, 2001 at 10:41:23:


I was told today that 8 out of 10 banks will not lend a buyer more than 15% over what my costs to buy and rehab. Why would they do this?

My understanding is that banks and mtg. co. look at the proptery’s value and the person getting the loan not at what I paid for it.

Thanks for your time reading and responding.

Brian Savage

Re: 15% over basis? - Posted by Ed Garcia

Posted by Ed Garcia on February 07, 2001 at 10:34:58:


Who ever told you that didn’t mean Banks, they meant, Mortgage companies.
The reason is, that mortgage companies sell off or broker their loans.

When Tom below, explained that in most cases, a bank will go purchase price, or appraised value, which is ever lower, he is right. However, after saying that, that formula is NOT CARVED IN STONE. I am currently doing a loan with a small bank on an office building with 100% financing. If you walk into a bank, they will tell you, that cannot be done.

Savage, Banks make loans based on CREDIT WORTHINESS. They make loans to PEOPLE and then collateralize it. They are what we call a full lending facility, they can make loans on anything, cars, boats, personal loans, credit lines, real-estate, air planes, etc. When I teach investors how to get a WORKING CREDIT LINE, that line is designed as a Business Credit line, not as a Real-estate line. They look at the real-estate, as the businesses inventory as an example.

I realize that at time this all can become confusing. One minute you might see me give advice on how to have a bank 100% finance a property, and then the next minute you’ll see me tell you that it can’t be done. The reason is because of the way I’ve identified the deal, the qualifications and circumstances of the borrower, and the chosen lender.

As I’ve said before, this business is not always carved in stone.

Ed Garcia

Re: 15% over basis? - Posted by Tom

Posted by Tom on February 06, 2001 at 21:10:28:

I think that you will find that 99% of the banks and/or lenders base the amount that they will lend on the LOWER of “The purchase price of the property” or “The appraised value of the property”. Banks like to see that YOU have something “at risk”.

Re: 15% over basis? - Posted by Savage

Posted by Savage on February 06, 2001 at 23:28:23:

I understand that. Perhaps I should give more details. This investor told me that if I purchase the home for 21K and invest 8K in the rehab. that the person who buys the home from me could only get a loan for 15% above what I paid for it and what the receipts for rehab were. in this case $29000 He then said that I needed to create a Note to show that I actually paid $52000 for the house (the appraised value after the rehab) and at closing the 52000 note would be recorded and then forgiven by the seller… So the courthouse would show a sales price of $52000 and whoever buys it from me could get a loan for no more than 15% above MY purchase price…
What the heck is this guy talking about?? Just when I thought I had it all figured out…

Thanks for setting me straight.