Posted by John Corey on April 22, 2006 at 18:43:05:
Gene,
The advice has been offered. This is how the folks who commented would do the deal.
If you want to ignore the advice or otherwise do a deal that appears to some of us as being a bit naked then that is your call. Just do not try to justify the decision. We will still think it is a bad one. Even if everything turns out OK in the end that does not mean you did the right thing. Just that nothing bad happened.
Insurance is for situations you can not afford out of pocket. Hence the logic to using an escrow process and obtaining title insurance. There is no law that says you need insurance. If you can make good on the deal no matter what or the relative will still like you if they have to eat their investment then all is good.
Re: Refi Private lending with new private lending - Posted by Ed Garcia
Posted by Ed Garcia on April 20, 2006 at 09:53:16:
Gene,
Who is lending you the money should do the deal through an attorney or escrow company. What they will do is get them a new title policy, and have your previous private lender sign a reconveyance taking off the old lender so that the new lender will be added.
If you just have a friend who is lending you the money and are not pledging the property as collateral, then you need to have the seller sign a reconveyance.
As far as your new loan, I agree with GMann, because of it’s size the cost is OK. We don’t have any information about your credit etc.
Re: Refi Private lending with new private lending - Posted by John Corey
Posted by John Corey on April 20, 2006 at 09:25:20:
Gene,
I do not know what state you are in. I would suggest a normal escrow process where the escrow agent requests a pay off and then handles recording the new lien. Title insurance and other such things would be expected if I was the new lender.
Though you could technically do it yourself it is messy and you would have to handle the funds before or after the documents. Better to let a pro stand in the middle and shuffle the documents and money.
John Corey
PS. Gary advice as to the interest rate is how I see it.
I would run with the 8%. Prime is at 7.75 and if you went to a local bank they would be at Prime or Prime + 1-2. They would probably charge a point on the deal. Not many options on a commercial loan of 60K. Really too small for anyone to want to mess with.
You are right on. The new lender is a friend (family member actually) and even thought I am giving them a new first on the property they trust me that the title is clean. At first I was thinking about just using an escrow Company but they charge $750 for this.
As far as having the seller sign a reconveyance, is there a good way to insure that they do this once they are paid(other than using a attorney or escrow Co)?
As far as the loan goes…I am ok with the term becuase the loan is pretty short term. I have tenants in the property that want to buy it from me, they just need more time than I have with the orignal balloon in place.
One more thought…As far as getting the reconveyance signed and the loan fully paid. I think one good way would be if I just meet them in person (with a public notary present), then just hand them the cashiers check and get the document at the same time.
The only problem is that they now live in another state…its only 5 hours from me, but if there is a good way to do this long distance…I would love to know.
Re: How would one handle it without an escrow co. - Posted by John Corey
Posted by John Corey on April 20, 2006 at 11:46:25:
Charge $750 for what? Does that include the recording fees, any transfer taxes, the title insurance, the Closing Protection Letter (CPL), the wire and escrow fees?
Look at a HUD1 and find the lines that show the closing fees for the escrow. That is more or less what you should expect.
Is this a lawyer or a title company?
Look at the prior HUD1 for this property. You likely will be able to get a discount on the new title insurance policy if you ask for the old policy to be updated. They only need to insure the gap between then and now as they are already covering the period from before into the past.
Even if this is a family friend it would be best to be professional and keep everything really clean. That way if stuff happens (someone dies and someone steps in as the new ‘partner’) everything is clean and clear.
I know this is a family member but business is business. Run this thru a title or ecrow company regardless of the $750. You need to protect your family member in case there is something wrong with the title. It is only fair that you do this since they are offering a market rate AND no points. Make sure this is a perfected first lein.
When you refi the property the $750 can be included in the loan. The lender can wire the funds straight from their bank to the title/escrow company and everything will work out. The title/escrow company will also send a package to the lender.
Look at it this way. You would have to pay the $750 + appraisal (2-3K) + points (approx $700) and have an adjustable rate with a bank (Prime + 0-2 = 7.75 - 9.75).
You owe this to your gracious family member/lender.
The $750 was just an estimate (from my past experiences with escrow fees) but I just talked to the escrow agent that I have used for the last few years. I told her exactly what we were doing and she gave me an estimate of $970 not including taxes.
You are making many assumptions here. My new lender (family member) will give me the loan with or without a first loan on the property.
He actually told me he wants to do this for me because HE OWES ME…I found him his house (that he now lives in) and he got it for 30% below FMV, it was a deal that would have made me over 40K.
I have also included him in a few diffrent deals that have made him a tremendous amount of money.
He approached me asking if I had any new deals for him…thats when I figured out this one.
I am not a reckless person, and he is going to make a lot of money off this place. Its a very secure investment (60k on a 130k property; that is currently rented for 1200) and he’s going to make 8% when right now its yielding only 3.5%.
My question to the forum was not to find out if my dealing with a relative are fair or not…I just wanted to know how to pay off a private morgage without giving away $1000 to a title company.