I find it amusing to watch you try to justify yourself.
It looks to me like GMann shook the monkey out of the tree.
You start out telling me that you?re very surprised at my lack of knowledge on this type of cash back deal. the seller would not incur any extra capital gains what so ever.
I go back and tell you that?s I made mention of credits off setting capital gains in the post and why it has to be handled conservatively and suggested you read the post a little more carefully. You came back and said you understood the post and disagreed with it and then gave a poor example that?s not even applicable.
After the GMann puts the squeeze on you, you then say ?anyway I could have my facts wrong as I did not really do this deal. but heard from another broker, maybe its one of those things that?s to good to be true.?
You?ve already made yourself look like a fool so I?m not going to grind you. Instead I?m going to teach you.
Going back to the example of the deal that you did not do.
How can you compare a house which is financed in a residential lending community to a 10 unit apartment building that?s income producing and financed in the commercial lending community. There?s absolutely no comparison.
As far as price is concerned or value it makes no difference what you think it?s worth the lender has its own criteria of value independently from the appraisers based on Cap Rate or Gross Rent Multiplier, and a 1.2 debt coverage ratio. You were comparing apples to oranges. The values of Residential are heaviest based on Market. The value on Commercial is heaviest based on Income.
Tony, my suggestion is, rather then try to win a disagreement on this board, try to learn from it.
Hello Ed. I need some advise for a current deal that I am doing. The property has an accurate appraisal for $520,000, and I have a contract for $380,000. I am going to assign the contract to an associate for $400,000. Now here lies the problem. My associate wants to pull out most of the equity at closing ($70,000). The problem here is that I don’t think I can get the sellers to agree to an inflated purchase pricec for purchases of a money-back at closing technique. Is there ANY way to structure the deal so that my assignee can recieve money at closing, without structuring the sales price for $470,000? Greatly appreciated.
It?s difficult to advise when we don?t have all of the facts.
It appears that you?re flipping the deal to your friend for $20,000 leaving him a built in equity of $120,000 and that would be his motivation for purchasing from you.
The number differential would spook the seller if you approach him with the idea of adjusting the price and is lender fraud because we know that this whole scenario would-be for the benefit of pulling more money out of the loan. Besides if the seller were to agree he now encounters additional capital gains.
If you take James Harris advice, you?ll encounter capital gains. Usually you can play some games and push it in the fix up department, but the appraisal would show the property condition and give you away.
If I were you I?d just tell my friend that if you can do as he suggests you wouldn?t be selling it to him and that you would pull out the additional $70,000. Explain to him that for him to purchase the property from you he makes $120,000 at a later date be either selling it or re-financing it, and that?s the best you can do.
Craig, I?m afraid of your friends thinking. You don?t tell us if he?s purchasing the property to live in, sell or hold as a rental. Without even knowing where the properties located I can tell you the property won?t pull rent high enough to cover the payments. So to me this guy is an accident looking for a place to happen. Craig don?t get involved with his scenario. If he wants to give you $20,000 for you position do it and move on. But don?t be a party to any of his stupidity.
Posted by James Harris on June 09, 2006 at 05:42:38:
Perhaps the only way to get this done is rather than assign the deal to your contact; have the associate purchase the property from you. Food for thought?
very surprised at your lack of knowledge on this type of cash back deal. the seller would not incurr any extra capital gains what so ever. his higher selling price would be offset by the credit given the buyer.
good luck
I?m very aware of what you?re saying but in doing so it has to make sense.
I was referencing the giving credit aspect when I said ?Usually you can play some games and push it in the fix up department, but the appraisal would show the property condition and give you away.? When giving credit from seller to buyer it has to be reasonable or the lender will ask for proof of the work being done.
What do you think Tony, lenders don?t find collusion between buyer and seller. If a lender has a strong deal they may not look for it, but a deal with a large credit will send up a red flag.
You might want to read the post a little more carefully,
ed,
i did read the post and your first response. did you read mine. i was talking about the capital gains that you mentioned. i feel your wrong on the facts as far as my post went.
on another matter just last month i brokered a deal were the buyer paid $775,000.00 for a 10 unit, seller gave him a credit of $50,000.00. lender gave loan of 85%ltv on inflated purchase price. half point below prime. and only half point fee.
" i brokered a deal were the buyer paid $775,000.00 for a 10 unit, seller gave him a credit of $50,000.00. lender gave loan of 85%ltv on inflated purchase price"
That deal was funded by a local bank or a private lender. Outside of those two entities it is not an acceptable practice to allow credits for more than minor cosmetic repairs. Cash out is a no-no on a purchase for 95% of lenders also. If it wasn’t funded one of the entities listed above, I don’t think I would post that you were involved in that kind of transaction on a public forum. Since you are a broker, you know that inflating a purchase price above the asking price is unethical and shady. You picked the wrong issue to push your point with Ed.
gmann,
stop breaking balls do you work for the feds?
anyway i could have my facts wrong as i did not really do this deal. but heard from another broker.
maybe its one of those things thats to good to be true.