There have recently been problems, especially in inner cities, where certain investors are defrauding lenders. They find a seller/property in distress and buy the house for a song. But then they sell to a new buyer at a much higher price without doing any real repairs. These people are in collusion with crooked appraisers who inflate the value of a property so lenders will loan more on the place than it’s worth. These loans are often insured by HUD, and when the lender has to forclose, HUD pays the lender off and gets the property. Problem is that HUD has now paid much more for the junk property than it is worth. HUD has come under a lot of fire for this and now they’re going after these investors/appraisers/brokers/etc with criminal prosecution. This practice has been called “flipping”.
The kind of flipping you want to do is perfectly legal, as long as there’s no bogus appraisal being used to defraud a lender. There are, unfortunately, dishonest and unscrupulous people out there who ruin things for the rest of us.
I’d either find another title company, or explain to your current one that you are aware of the illegal practices of some investors/appraisers and you’ll have nothing to do with any of that. If you want to be wholesaling and if you already have a list of investors to flip to, ask them which title company they use.
-DaviL
Simultaneous Closings Aren’t Illegal - HELP??? - Posted by Charise
Posted by Charise on January 19, 2001 at 11:07:19:
I’m a new investor and I’ve been trying to find a title company in the Chicagoland area to perform a simultaneous closing. I’ve called a few places and two have told me that “flipping” is illegal. I know this can’t be true because that’s how most get started. Everybody flips!!! I’m so confused. First off, I had to explain what a double escrow and a simultaneous closing are. I finally talked to one manager of a title company and he was very leary of it and said most are but that he MAY be able to do it if it doesn’t involve a lender.
I know “flipping” can’t be illegal so can someone tell me WHY they would say it is? Am I explaining this wrong or something?
If anyone’s in the Chicagoland area that can refer me to a company that’s already familiar with all of this that would be extremely helpful too. I’m trying not to get frustrated here.
In NY State, title co’s merely do the closing, making sure that the lender’s checklist is followed. It is called a Witness Closing. They are not responsible for values, etc. At the time of closing this is what happens: The money is wired into the T/C escrow account. The seller has already signed all neccessary doc’s. and they are being held in escrow by the seller’s attorney. Now, at the T/C, you, the flipper come in, and your buyer with their attorney. In one room you, and the T/C officer are signing the papers to buy, the seller’s attorney walks out with a check from the T/C, and has to hold it until that afternoon. Next, you go into the other room with your buyer and their attorney. You then sign all the papers to sell. They walk out with a deed that is good that afternoon. Why that afternoon? All the doc’s have to be recorded by the T/C, and it takes a couple of hours. You own the property for a minute. A title co. does this all the time, it is NOT illegal, but it is very stressful in that many things have to line up for the day of closing. Hope thios helps.
Simultaneous Closings Aren’t Illegal ! - Posted by Chicago Steve
Posted by Chicago Steve on January 19, 2001 at 18:33:26:
I’m with Jim. Save the slang for the streets or the chat room or anywhere but those concerned with thier potential liabilities. Simply explain in laymans terms what it is that you want to do. Buying things and one price and selling at a higher price is what keeps our economy going. Don’t believe it…go to the grocery store.
Charise,
I too am in the Chicagoland area.
Flips are not illegal, as you know.
But, when you talk to people about “flipping”, they may not totally understand what it is you are referring to.
Since the word “flip” means different things to different people, I do not use it when talking to lawyers or title companies.
If you must tell them what you intend to do, call it “Wholesaling properties”.
And if they ask what that is, tell them that you buy homes for under market value and sell them at prices under market value.
I have done several “Flips” as we call them here, and not had any problems.
Rather than call any title companies I called some attorneys.
When you speak to the RE attorneys, ask them what it costs to do a closing for you?
Then ask them if they can handle a “simultaneous close”?
Some will be clueless, and others will know what you want and accomodate you.
You may even get lucky and find an attorney who will do your double close for one closing fee, since both are done at once.
Then, when the title company gets involved, the lawyer does all the talking and sets everything up.
I did have one title company in the beginning tell me they could not do a simultaneous close.
They had never heard of it and therefore assumed it could not be done.
I just had an attny talk to them and set it all up.
To help you save some time, I’ll give you some info on local companies I have used.
There is a title company in our area called “Law Title”.
This company is owned and oerated by several Chicagoland attorneys.
This is not like a regular title company where you goto there office to close.
You get an attorney to do the closing, and Law title comes to there office with the docs and closes the deal.
Since they are owned by attorneys, they seem to understand more of the creative side to RE.
I have used them thru my attny a few times and they work well.
You may also check out Chicago title, they are good.
I have also recently used “First American title”, they closed a L/O deal for me, when my T/B’er exercised the option to buy.
In my opinion you’d be better off with an attorney who is local and can close your deals for you.
So, make some calls to local attorneys who do closings, and talk to them.
Just leave the word “Flip” out of the conversation.
And if all else fails, drop me an e-mail and I’ll give you my attorney’s name and number.
I’m just not sure if he will go too far away from where we are now.
I prefer to use an attorney to set up the closings and get it done. When I have a deal I need to close at a title company, I just call my attorney and fax him the agreements.
He takes it from there and just calls me telling me where and when to show up to sign and get paid.
I like that.
And it is totally worth the few hundred bucks I give him for doing so.