double closes involving lenders - Posted by rayrick
Posted by rayrick on April 08, 1999 at 15:38:15:
There have been a number of posts floating around (some instigated by me!) concerning double closes in which the second half of the close involves some sort of lender that is NOT a hard money lender. Leslie dear posted below that at least some lenders will balk at this if there has been nothing done to the property to justify the mark-up in price. I quote:
"I’m wondering if the lender won’t read the title report. The fact that the seller is not the current owner will be obvious. I tried this only one time, and the lender asked what improvements justified the bump in price so soon. I have not tried it since. Its possible some lenders don’t care, mine disallowed it. "
Examples where this sort of thing would come into play include:
using a straw man to buy property for 80% FMV.
getting an option to purchase for 80% of FMV and then selling for full price.
getting the property under contract for 80% FMV and then flipping as 80% bank loan, 20% seller financed.
It seems to me that if the banks are going to take issue when you are qualifying your buyer with the fact that you do NOT currently own the property, but merely have a contract to buy for 80% of FMV, that NONE of the above would work.
Does it depend on the type of lender?
Who out there does this sort of thing? What has been your experience? Am I missing some key conceptual piece of this type of transaction that is leading to my confusion? Does no one out there want to touch this topic with a ten-foot pole?