Creative financing or dreaming? Urgent! - Posted by Jay

import · September 30, 2003, 5:30pm

Posted by Richard Cobb on October 11, 2003 at 06:37:52:

You might want to check into a Wrap Around Mortgage, and see if it will work for you. If you don’t know what it is you can goto any search engine for an explaination.

import · September 30, 2003, 5:30pm

Posted by Jay on September 30, 2003 at 17:30:13:

Hi,

IM working on a project and i was thinking if anyone can help.

IM buying three buildings, all from the same owner. total asking price is 1.9 mil. the owner has one blanket mortgage on all three buildings for a total of 1.9 mil. the mortgage is in his personal name. the properties are in the same city but not on the same street, so it involves more than one deed. the problem is that the mortgage is not assumable. Now, please tell me if this will work: i ask the owner to refinance it into an LLC with a non-recourse mortgage. then he can sell me the LLC for $100 or so. this way i take over control of the buildings and i continue to make the mortgage payments to the bank. and the seller walks away since this is a non-recourse mortgage.

Questions:

Will any bank refinance all three buildings into an LLC? (its in his personal name now.) Will the bank do a non-recourse mortgage for something like this? If a bank does finance it on a non-recourse mortgage, will the seller have to notify the bank when he sells the LLC? If yes, will the bank ask to check out the buyer? and last but not least, what recourse will the seller have if any after he walks away from the deal?

Please reply as this is urgent.

Thanks

import · October 1, 2003, 9:21am

Re: Creative financing or dreaming? Urgent! - Posted by cam

Posted by cam on October 01, 2003 at 09:21:36:

Dreaming. When the ownership of the LLC is transferred to you, it will trigger the due on sale clause of the mortgage. Mortgages have very specific languange that prevents this type of thing. Basically when ownership changes hands, no matter what structure the sale takes, the mortgage becomes immediately due. Buying the LLC is useless without the propperty. If the seller does not notify the bank, he (and you) will be committing mortgage fraud, which I believe is a felony. You would also be slapped with criminal and civil charges from the state our local government in the event that there are real estate transfer taxes.

Even non-recourse mortgages have some recourse for environmental and so called “bad boy” events. (fraud, misrepresentation etc.)

Of course the bank will check out the buyer. If the loan is not assumable or you don’t qualify. The due on sale clause will come into play.

Lenders have been in the finance business far longer than you or I. There are no shortcuts that they haven’t already seen or prepared fo.