Posted by leslie dear on April 08, 1999 at 01:29:53:
I’m wondering if the lender won’t read the title report. The fact that the seller is not the current owner will be obvious. I tried this only one time, and the lender asked what improvements justified the bump in price so soon. I have not tried it since. Its possible some lenders don’t care, mine disallowed it.
Strawman…could someone explain. - Posted by JohnB_NJ
Posted by JohnB_NJ on April 07, 1999 at 20:41:36:
Could someone breifly explain the “strawman” theory. A morgage broker recommended it as a way to get a loan on a home using a partner. i didn’t want to sound like I was new at this, so i said, “I will think about the strategy”. I remember that Bronchick touched on it at Dallas.
If someone could give me an example of how it could work, I would greatly appreciate it.
Thank you
Sincerely,
John Bittel
Re: Strawman…could someone explain. - Posted by Bert G
Posted by Bert G on April 08, 1999 at 12:48:05:
I recall Bronchick said not to put any strawman arangement in writing, because it’s loan fraud.
Re: Strawman…could someone explain. - Posted by Dave T
Posted by Dave T on April 07, 1999 at 22:05:29:
I have not done this so my explanation will only attempt to clarify Bill Brochick’s presentation at Dallas. If I have it wrong, then I trust that someone will correct my understanding.
Assume that you find a $100,000 property that the seller will let go for 80% FMV, or $80,000. Your banker will only give you a first mortgage for 80% of the purchase price, or $64,000 in a non-conforming loan.
You arrange for an intermediary, your “strawman”, to buy the property for $80,000, then sell it to you for $100,000. Settlement of both transactions to occur in a simultaneous closing.
Now you go to your bank for an $80,000 loan (80% of your $100,000 purchase price) which then passes through the strawman to the seller and you take ownership. The $20,000 difference between the bank mortgage and the $100,000 contract price is refunded to you by your strawman after closing title.
With this technique, you get 100% bank financing for a purchase at 80% LTV with no money out of pocket except closing costs. The property must appraise for the higher purchase price to make this work. I believe that Bronchick also said that the strawman should be an unrelated party.
I am not clear why this has to be a non-conforming loan. Perhaps someone could answer this for me.
Re: Strawman…could someone explain. - Posted by Tim Jensen
Posted by Tim Jensen on April 08, 1999 at 17:47:50:
Interesting.
Go To Joe K.'s site he has an article about the strawman going down in flames.
Re: Strawman…could someone explain. - Posted by Redline
Posted by Redline on April 08, 1999 at 13:13:05:
This has to be a non-conforming lender because ‘traditional’ lenders will not allow the owner (strawman) to take back the 20% downpayment as a note - which is how it works in Bronchick’s example. The note is then ‘forgiven’ and you end up with the property at 80% LTV.
RL