HELP!!!I just WANT out from under it - Posted by JulieW

import · May 26, 1999, 8:21pm

Posted by JohnBoy on May 28, 1999 at 12:24:04:

Tell them you have a property that you will be closing on on such and such date. You also have a buyer that will be purchasing the property from you immediately following your closing with the seller. So you want to set up a “Simultaneous Closing”. Ask them if they have done these before? If not, find another title company that has.

The correct wording is “simultaneous closing” vs. “double closing”. Although they basically mean the same thing to me, but maybe not to a title company. Who knows?

import · May 26, 1999, 8:21pm

HELP!!!I just WANT out from under it - Posted by JulieW

Posted by JulieW on May 26, 1999 at 20:21:27:

I have made several offers on FSBO’s and I keep running into people who have either inherited a house or owe nothing on their house and JUST WANT OUT FROM UNDER IT. Therefore are not very interested in l/o’s or any type of owner financing. Am I wasting my time on these houses or is there another way to get into these with little cash? Most of the creative financing ideas in CS’s course involve some type of owner assisted financing. HELP!

JulieW

import · May 27, 1999, 1:44pm

Re: HELP!!!I just WANT out from under it - Posted by Bill Gatten

Posted by Bill Gatten on May 27, 1999 at 13:44:24:

IDEA TO CONSIDER (The way I do it);

Since the seller doesn’t want to “carry,” ask if he’d consider giving you a year or so to come up with the cash and the bank loan, were you to take over 100% of all responsibilities in the interim. Then? in order to protect your interests, he would (you suggest) place the property into a trust in his own name (a “title-holding trust,” you tell him), making you a beneficiary in it, rather than conveying any title interest to you. If he agrees, have him set up a 3rd party Trustee Co-beneficiary Land Trust arrangement with a termination date a year “or so” down road?at which point you will obviously be free to sell or refinance. Then (to make him feel even better) suggest that since you are going to be paying all the bills, he might as well refi and pull out as much cash as he can. Or, you could limit him to 60 or 70 percent…he won’t get much more in a non-owner occupied re-fi anyway.

Here’s a tip on getting the term you want… in the beginning of the negotiation (at the slightest smile or nod of the seller’s head), I always use the expression, “?a year or so?,” assuming they would surely know that the “or so” part could mean 2–or maybe 3–years. Then when I get the concession, I very humbly ask the seller if he/she wouldn’t mind if we put a teensy weensy little safety clause in our Agreement, saying: that “after exerting best efforts and due diligence in seeking suitable [re]financing at the trust’s termination, should co-beneficiary [me] be unable to procure acceptable [re]financing at the scheduled termination date, then the beneficiaries mutually agree that the entire [PACTrust™] transaction would be extended for one year at a time to a maximum of two additional years.” Re. the house in which I live (that I acquired on a PACTrust™ about two months ago), it’s a 3 year agreement with 3 years of extensions (6 total).

Next, you run an ad and pull in a third beneficiary to reside in the property, make all the payments and handle all costs of ownership?until such time as you and they sell or refinance. At that time you’ll receive the spread between what your price is, and what theirs is. And in these scenarios I also take half of the appreciation over the trust term during which time they are in the property (a “Land Trust Equity Share”…as it were). At the end they give me my beginning equity, my share of the principal reduction and my share of the appreciation.

Hope this helps.

BTW: Johnboy’s advice is also excellent (as usual) and a double Escrow really should never be a problem as long as no facts are concealed from anyone…it’s those “straw buyer doubles” that’ll get your sweet Gluteus Maximi Super-Glued shut. Or worse… they could get you tossed in the slammer WITHOUT the Super Glue.

Bill

import · May 27, 1999, 12:41pm

Re: HELP!!!I just WANT out from under it - Posted by Jim IL

Posted by Jim IL on May 27, 1999 at 12:41:52:

Julie,
You say that you have talked to many FSBO’s and they simply, “want out from under it”.
The key word here is , “Want”.
It is your job, as a “Creative Real Estate Investor”, to find out what the seller “needs”, not “wants”.
Every seller I call “wants” ALL CASH, FULL Market price, and a closing tommorrow.
But, if you listen to them and ask the right questions, you will soon find a different story behind some. Let the seller do the talking.
Example:
We called a FSBO ad, maybe 2 months ago.
The woman stated that she was single, and did not like living in her TH any longer. She WANTED to sell it, and CASH OUT, then buy another home near her family.
I explained that “yes” we do buy for cash, but at a substantial discount, because this was how we made our profit. I further explained that we could offer her an all cash offer, but that she owed too much on the home for that to be a feasable.
She said she understood.

I then explained our L/O program to her, and let her “think about it”.
Well, I am meeting with her tommorrow to go over the “details” of L/O’ing her home.
She has not been able to sell on her own, and has now found another home. She already has the cash to put down, is approved for the new loan, and simply cannot afford double house payments.
So, we may get this one.
You see, NOW she NEEDS, not WANTS, to cover her payments and that is all.
WE got to this point by listening, and then offering her alternatives to a traditional sale.
We explained “how” the L/O works to her benefit, and left it at that.
So, do not call the FSBO’s and see what the seller WANTS, determine the sellers NEEDS and then try to formulate a way to meet the needs and make a profit.
If you cannot do that now, keep the sellers contact info and do followup. They may call you, but calling them back a few weeks later never hurts.
Luckily, this one called me before I called her. (I had planned on calling her soon anyway)
Good luck to you,
Jim IL

import · May 26, 1999, 9:13pm

Re: HELP!!!I just WANT out from under it - Posted by JohnBoy

Posted by JohnBoy on May 26, 1999 at 21:13:21:

Assuming they just want out from under it and they are motivated to get out from under it, then make a low ball offer.

Let’s say you found one that is worth $100k. They won’t l/o or owner finance. Offer $60k if they want all cash out of the deal. But you don’t have $60k, right? So what! You don’t need any money. You need a little time to close the deal that’s all.

You get the property under contract for the $60k or even $70k if that’s what it will take. Tie it up for 60-90 days to close on the sale.

Next you run an ad in the paper.

OWNER WILL FINANCE!
NICE! 3 bed/2 ba House.
Call xxx-xxxx

You get a buyer with $5k - $10k to put down. You have a mortgage broker run their credit and see if they can get a new first mortgage for 80% LTV. That would be $80k in this case. Once you find a buyer that can qualify for a new first mortgage at 80% LTV, you set up a double closing between you and the seller and your new buyer.

Your new buyer comes to closing with $5k and a new loan for $80k from their lender. That’s a total of $85k in cash at the closing coming from your buyer. You draw up a second mortgage for the difference which will be $15k. $100k - $85k = $15k.

The $85k coming from your buyer will pay off the seller their $60k, leaving $25k in cash left over plus your second mortgage of $15k that you will be carrying for your buyer.

Total profit to you at closing is $25k cash and a second mortgage of $15k. $40k profit to you and all without using any of your own money except for the cost of your ad you put in the paper to find your buyer. You may have to help your buyer pay for some of the closing costs or take a little less in cash up front and add the difference to your second mortgage. Or get the seller to agree to pay all closing costs when you make the deal from the begining. Or even get the seller to pay half of all closing costs. Lots of ways to work it.

import · May 26, 1999, 8:36pm

Re: HELP!!!I just WANT out from under it - Posted by Tyler

Posted by Tyler on May 26, 1999 at 20:36:17:

Depending on what “just wanting out from under it” means, you could have some deals to work with.

Maybe you could give us an example of what they are willing to do (asking price vs. value). I’m assuming by your post that you’re saying they need cashed out.

With the specifics we can get creative…

NT

import · May 27, 1999, 3:20pm

^ Every Newbie Needs to Read the Post Above from Jim IL^ - Posted by Bill K. (AZ)

Posted by Bill K. (AZ) on May 27, 1999 at 15:20:11:

Jim,

I’ve never heard it said better or explained better.

Thanks for reminding us why we’re in this business.

Bill K. (AZ)

import · May 26, 1999, 10:40pm

Re: Double Closings(For JohnBoy) - Posted by JC

Posted by JC on May 26, 1999 at 22:40:09:

Hello JohnBoy. I am new to creative financing and have some questions you might be able to answer for me. I am confused with double closings and flips. Are these legal? I have asked a number of Realtors and Mortgage brokers about this subject, and I get different answers. BTW, how do you explain the 20% dwn payment, in the form of a 2nd mortgage to the lender when you flip the property in the post you previously replied to.

Thanks for your input in advance.

JC

import · May 28, 1999, 1:50am

Re: Double Closings(For JohnBoy) - Posted by JohnBoy

Posted by JohnBoy on May 28, 1999 at 01:50:18:

Looks like my other post went into cyber space. So here’s another one to answer your question.

Yes, they are legal. You enter into a contract to buy a property. Is that legal? Of course. Otherwise no one could ever legally buy a property if it wasn’t legal. In fact, you HAVE to have a contract to make it legally binding regarding real estate transactions.

Is it legal to sell a property? Of course. Otherwise no one could ever sell their property, right?

Let’s say you enter into a contract to purchase a property. Someone comes along and decides they would like to buy the property also. But they can’t because you already have a contract to buy it. So they come up to you and say, hey, I’ll give you $5k for your contract so we can buy that property. Can you sell them your contract? Of course. It’s YOUR contract. You have the rights to buy that property under the terms of your contract. If you decide to sell your rights to that contract then that’s your business. Perfectly legal. “Unless” the contract states it is NOT assignable. But then you could sell the property to your buyer AFTER you close on it and take legal title in your name. Do you have to own the property for a certain period of time before you re-sell it to someone else? Of course not. That’s where a double closing comes in. You close between you and the seller. Two minutes later you close between you and your buyer. “Double closing”. The title company will take care of handling this arrangement for you. They will take the proceeds coming from YOUR buyer, and pay off the original seller. Any proceeds left over will go to you. If that was illegal then title companies wouldn’t do these types of transactions.

How do you handle the 20% down seller carry back with the lender on a double closing? Simple! You TELL them you will carry back a second mortgage for the buyer. Remember, there are a lot of lenders out there that offer these types of programs. So there’s nothing to hide here.

In the above post I gave the example on, the original seller isn’t the seller to YOUR buyer. YOU are the seller to your buyer. YOU as the seller to your buyer will be carrying back the second. The original seller knows nothing about your buyer. As far as they are concerned YOUR the buyer of their property. Which in the case of a double closing you are. Once you close with the seller you are the legal owner of the property. Of course you will only own it for about two minutes because YOUR buyer will be sitting in the next room at the title company ready to close on the sale with you. Since your buyer will be paying a lot more than what you had to pay for the property you won’t need to bring any money to the closing. The title company will just use the proceeds from YOUR buyers loan and down payment to pay off what you owe the original seller. Any monies left over go where? You guessed it! Hip national bank! (That’s YOUR pocket!)

Is that legal? Sure it is. Why wouldn’t it be? The original seller legally sold the home to you. You legally bought the home from them. (Below market value of course) Two minutes later you legally sold the home to another buyer. The other buyer legally purchased the home from you. (At retail value) You legally bought and sold the property and made a profit in the end. What’s wrong with that? Perfectly legal!

import · May 28, 1999, 12:06pm

Thanks a bunch - Posted by JC-FL

Posted by JC-FL on May 28, 1999 at 12:06:40:

Thank you very much for taking the time to resend your post. When I read it, I called a mortgage broker I now and he confirmed your answer on the 20% down, seller carryback.

As far as double closings. How do you approach a title company an this matter if they have never done one before? I once mentioned it to a title company in Miami, and they said it was illegal. Maybe I did not make myself clear when asking my question.

Again thanks for your help.

JC

import · May 28, 1999, 12:05pm

Thanks a bunch - Posted by JC-FL

Posted by JC-FL on May 28, 1999 at 12:05:28:

Thank you very much for taking the time to resend your post. When I read it, I called a mortgage broker I now and he confirmed your answer on the 20% down, seller carryback.

As far as double closings. How do you approach a title company an this matter if they have never done one before? I once mentioned it to a title company in Miami, and they said it was illegal. Maybe I did not make myself clear when asking my question.

Again thanks for your help.

JC