banruptcy time senstive transaction - Posted by M.G. Shevlin
Posted by M.G. Shevlin on January 14, 2001 at 07:58:44:
Dear Ed,
I’ll try to be brief. About 18 months ago(a few months after my Bankruptcy discharge/due to Divorce), I purchased a piece of land with terms. I was advised to do this so that I could hold on to the property until I was 2 years separated from my discharge, so that I could be ‘Mortgage-able’.
The Community where I purchased the property skyrocketed in value. What I paid $117k for was worth $175k to a Builder, if I rolled my profit to one of his more affordable communities, and had him build a home for me.
Because the home would be completed just before the 24 month distancing from my discharge, my brother agreed to qualify for the loan. We got a commitment for him on a NO-DOC product.
The home is now being constructed (they are sheetrocking)and his wife is getting cold feet about the viability of me qualifying for the Loan and indemnifying her husband.
We were originally counseled to add my name to the deed after the closing, and then I would apply to refinance shortly after my 24 month ‘probation’ period in May.
Would it be better for all parties involved if my brother bought it individually (estimated closing date is April 1st), and then sell it back to me? There has been a considerable amount of documented equity in the home since we contracted.
Is it viable for him to sign a note for the original down payment, closing costs, and extras (approximately $75k), and we’ll use that note as the down payment in the separate transaction? All capital on the original purchase has come from me. Could he give me a sellers concession for the
closing costs to make my down payment on the note the only capital I will need to qualify?
Additionally if he ‘sells’ the property to me for $30k more than he originally ‘paid’, what would his Tax ramifications be? There are extras to be paid to the builder in addition to the contract for about $12k rasing the ‘Basis’. My Brother stands to benefit tax wise from the first transaction closing costs with an estimated $10k adjustment to income.
What a Lender would see is a 20% down No Income Loan(I own my own business) with a paper trail for all monies, to a an individual 24 months out of Bankruptcy that has 7 re-established lines of credit.
Is this the right way to do this?
Thank you for your input. I could definitely use it.
MG Shevlin