Posted by Randy on August 27, 2003 at 15:45:04:
Because a Performance mortgage has the same effect as a 2nd that is paid out of the settlement at closing. It does not matter if you?re an investor or not, just someone you have a better alliance with than the seller (who may decide he sold too cheap).
Quick, What forms to Use? - Posted by Chris in L.A.
Posted by Chris in L.A. on August 27, 2003 at 13:26:56:
Quick Scenario: Got a property under contract for 299,000, with a ARV of 380,000. I need 320,000 to purchase, repair, hold and sell.
My lender says the cheapest way to get the funding would be to bump the purchase contract up to 320,000 and simply have the seller give me the 21,000 outside fo escrow. Seller says that is fine, but what can I get him to sign or fill out to make sure that this in fact happens once the deal is done. Does anyone out there have a form, promise to pay, etc.?
Also what would the seller benefit in doing this? He won’t have to pay taxes on the money he didn’t even get will he? Thanks to All
Asked And Answered?. - Posted by Randy
Posted by Randy on August 27, 2003 at 14:16:01:
Is your ?Lender? a loan broker? Or is your ?Lender? the actual person lending you the money? If not don?t do it, it is loan fraud!
There is no way to make sure the seller gives you the $21k. It can not be on the settlement sheet paid out of the proceeds of the new loan so he can just refuse to give it to you. Even if you draw up a separate agreement like a promissory note if he refuses to pay you have to sue to collect, just try telling the judge ?Well your Honor, this was proceeds from and illegal loan the seller and I cooked up? And yes is’s Taxable Income to him.
Now if for example I (or another investor) was flipping this property to you, I could file a ?Performance Mortgage? for $21k recorded right behind the 1st that raises your purchase to $320k and at closing I would receive a check for $21k?IF I was someone you could trust, well you wouldn?t have to worry. JMHO
Re: Quick, What forms to Use? - Posted by Jim (NY)
Posted by Jim (NY) on August 27, 2003 at 14:00:49:
Okay, I think that you’re pushing the “creative” envelope here…
Yes, the seller will potentially have to pay tax on the $21,000 (I say potentially because it depends on whether or not this is his personal residence.)
Your lender is advising you to take the 21k outside of escrow? I find that hard to believe…
Several questions for you - Posted by randyOH
Posted by randyOH on August 27, 2003 at 14:54:45:
Randy,
I am not following your response very well. I would appreciate some clarification:
Thanks in advance,
Randy