Interesting Site re Fraud - Posted by Griffith

Posted by JT-IN on March 08, 2006 at 23:02:47:


The crowd may not always like how you deliver the goods, but you always seem to be able to deliver the “goods”, none the less… Always very good, insightful info…



Interesting Site re Fraud - Posted by Griffith

Posted by Griffith on March 08, 2006 at 11:50:26:

This is from Ralph Roberts, Flipping blog. Read the IL legislation proposals. It will be a crime, apparently, to pay less then 82% of FMV (so much for Ron Legrands MAO formula)!


Life can continue on - with creative terms - Posted by John Behle

Posted by John Behle on March 08, 2006 at 19:52:41:

I haven’t read the legislation, but keep in mind there may be ways to continue on as normal with some twists.

Terms can always make up for prices. Seller financing can be adjusted to arrange a higher price. I’ve used seller financing for years to give seller’s their price while still getting a deal that works for me. I’ve also seen many, many, many deals die where a seller and buyer could not come together on price - but could have if they had some creativity. Here’s some examples.


Let’s say there is a $100,000 FMV property you want to buy, but have to buy at 75% of value to make it work for you.

$100,000 FMV (Fair Market Value)
$75,000 desirable price.

$82,000 Illinois Brown Shirt Price

$60,000 First Loan
$22,000 Existing second (purchased for $15,000)

Instead of cash to the seller of $15,000 you take that same amount and buy an existing second Trust Deed or Mortgage Note of $22,000. I won’t go into the terms of the note at this point. A lesson on “discounting” and the “Time Value of Money” takes some time. Just understand that seller financing can be purchased at a discount and traded at face value. It’s one of the most profitable techniques in real estate.

If needed, the seller could always sell that note later to get the cash they needed. It could even be sold right up front at closing without stepping over any lines. Remember, this is an existing loan, not a new loan and it is a legitimate sales price that meets the state gestapo standards.


The numbers would look the same as above, but instead of using an existing note, you can create a similar note to the seller under the same terms. If cash is needed, the seller could sell the note for the $15,000 value.


Let?s look for a moment at the time value of money. Assume on the deal above that you would be willing to pay $75,000 by taking the first loan ?subject to? and with a second of $15,000 at 10% over 180 months. But, remember they?ll throw you in jail if you pay less than $82,000 for the property. The two loans below are basically the same. Same payment for the same time period. The difference is a higher balance and lower rate on the second loan - but, you are paying exactly the same amount over the term of the loan. You just boost the amount or PV (Present Value) to $22,000 and lower the rate from 10% to 3.86%.

Taking it one step further, line three shows how much you could pay on a zero interest loan. Zero interest is NOT illegal as some people think. There just could be the possibility of imputed interest from a tax standpoint. At zero percent, you could pay $89,014 by giving a second of $29,014.



(sorry about the formatting, there is no way to crete a chart or yield worksheet in a post)

There are many other options where you could legally give the seller the percentage demanded by the ?Republic of Illinois? or any other state that decides to suspend civil rights - without having to go broke at the same time.

Interesting - Posted by Nike

Posted by Nike on March 08, 2006 at 19:10:13:

The 82$ requirement only applies when the seller retains an interest in the property (sale-leaseback/option).

Re: Interesting Site re Fraud - Posted by Clint

Posted by Clint on March 08, 2006 at 18:52:31:

And who determines what FMV is…?