What about a “no-doc” loan? In my area, these are used with self-employed individuals who have cash flow, but would not show well on standard financing.
What is she hiding? With respect, I have had dealings in non-RE matters with this personality type. There generally are two reasons why people do not file; one that sounds good, and the REAL reason. Try to find out what the two reasons are, if for no other reason than to cover your “keester.”
I have a client who is in need of a home. Her problem is that she has not filed federal income tax returns for three years, Don’t ask me why. She has 50K and she wants to purchase a 200K-300K home I have several for her to look at. She is self employed and works out of her home/rental, Her credit scores are as follows becon 650 FICO 670 Empirca 699. There are know liens against her as of this time. She can prove her income with bank statements but she cannot sign the IRS 4506 form. What type of home and note discount would we be looking for in this uper price range?
I must respectfully disagree with some of the other comments here. Sure the fact that she does not file tax returns is a concern here and one that she should Right quickly before the IRS catches up with her. Your NEVER should try to “flip off” the IRS, however if you find a MOTIVATED and flexible seller that will consider owner financing, either by taking back a 1st lien only, or a 1st lien and a 2nd lien as well, where the 1st lien can be converted into cash either at the time of closing or shortly thereafter.
Depending on What the note interest rates would be ? (11% -12% range is recommended) A 10% +/- discount off the note balance will probably work.
As far as the IRS is concerned, as long as there is currently NO tax lien filed of record, the seller held purchase money mortgage would be insurable from a title insurance standpoint.
With that amount of cash down (documented of course), and the right conservative LTV % for the 1st lien note that would be offered for sale, I would have interest in that seller financed 1st lien note.
Gerald,
I know you see dollar signs in your eyes, it’s tough to give this one up. I mean how often do you get a buyer who has 50k down.
The problem is it won’t be long before the IRS catches up with her if they haven’t already. My sugestion to her would be to find one of those companies that negotiate with the IRS that may get her a reduced Payment or Penalty . Unfortunatly with 50K available they are going to want it if she owes it. The sooner she takes care of it the better off she will be. Who knows maybe their will be money left for a deal after she does.
Posted by B.L.Renfrow on May 18, 2000 at 11:43:08:
As Phil says, no note buyer will touch this with a 10-foot pole, if they know the facts. If by chance you are considering “forgetting” to pass this material fact along to the note buyer, shame on you. And when the IRS DOES catch up with her, they will immediately record a lien against anything she owns.
She MIGHT avoid the problem by lease-optioning a property, IF she intends to get squared away with the IRS and set up a payment plan. Or perhaps she could buy on an unrecorded land contract, or take beneficial interest in a land trust.
If you are determined to do business with her, sell her a $50k home for all cash and let her worry about the consequences.
She has provable income from bank statements, but does not file IRS tax returns for the last three years. Come on now, something is not right here.
If in fact she does have income showing on her bank statements, the IRS could quickly see this and prosecute her for tax evation. The IRS slaps tax liens on anything that she owns thus clouding the title so that it can not be transfered. Sounds like you are thinking of creating a note and selling the note to a note buyer. The note buyer will do their due diligence and will want a signed 1003 loan application. And if she is self employed will want to see at least the last two years of tax returns. No go here.
Even if you created a note and were able to sell it what happens if she defaults, the notebuyer forecloses and finds out that there are IRS liens on the house.
Your buyer is hiding something and her story doesn’t add up. I like to only deal with people that are up front and honest. If she is cheating the IRS, why wouldn’t she do it to you.