Posted by JohnWe (NoCA) on February 07, 2000 at 10:22:03:
I’m not sure what happened here, but here’s the question that was originally posted…
[ I understand the investor taking the property “subject to” (seller puts deed into trust etc…) in order to
gain control of the property, but my question is reselling under an ILC. Doesn’t this violate DOS? The new
buyer, what are his rights? He won’t get the deed for 30 years. What security does he have? I know that
there will probably be a refi or another sell with a new loan which will clear everything up. Just some
thoughts. Thanks in advance. ]
The ILC violates the DOS, as does taking the property subject to. The questions is, how will the lender ever know? Especially if the ILC is never recorded? And even if he does find out, why would he call the note due on a performing loan?
The new buyer has rights, but unfortunately they won’t help him here. He could get wiped out. Even if he does record his ILC, it will be behind the underlying mortgage which is 1st in time (and therefore 1st in line). The only way that will happen though, is if the lender for some reason forecloses. They could foreclose if you don’t make the payments to the loan – that’s your problem. They could foreclose because you violated the DOS. Maybe, but I strongly doubt it. And even if they do, look at all the things you could do:
Get the original seller to get new financing
Get the buyer to get new financing
You get new financing
Get the buyer to sell the property to a new buyer
In all cases, the lender loses, so why would they call the loan due?
As far as the buyer getting his deed in 30 years, who cares? Certainly not you. And the buyer shouldn’t care because he has equitable title and right of possession, and that’s all that really matters. It’s just like buying a car. The bank holds the title. Who cares? I still drive the car. And I could sell it, or drive it into a wall if I want! It’s my car. Same thing with an ILC.
Do I get my earnest money back? - Posted by Tony James
Posted by Tony James on February 06, 2000 at 09:08:11:
Hopefully I will be closing on this HUD house I am in agreemment with next week. I am doing a SIMO closing and should leave with a check for $15,450. This will be my first flip. However, I put $500.00 down for earnest money. Will I get this back also?
I haven’t been thinking about it, but it would be nice to know I get it back if it’s my right.
Re: Do I get my earnest money back? - Posted by JoeB(Atlanta)
Posted by JoeB(Atlanta) on February 06, 2000 at 10:03:43:
Hi Tony, the short answer to your question is ‘yes, you’ll get your earnest money back (sorta)’.
The long answer is: you’ll get credit for the fact that you already gave $500 towards the purchase price, thereby reducing the price you have to pay on the ‘buy-side’ of your simultaneous by $500.
So, when you sell it there will be a $500 larger ‘spread/profit’ between your buy and sell price, effectively ‘giving you back’ your earnest money.
BTW, if you do an Assignment of contract on future flips, then don’t forget that you or attorney needs to give you back/credit you with the earnest money you gave to the homeowner since the full purchase contract terms AND earnest money payment will be given/assigned to your new investor-buyer.
P.S. Always proof the Settlement Stmt (HUD-1) to make sure these numbers are right, about 75% of our HUD-1 have some mistake in them.
Posted by CarolFL on February 06, 2000 at 11:12:51:
You are using a great closing agent!
Couldn’t agree more about proofing - and understanding - the HUD 1.
Also, about having copies of the closing package - note included … particularly if “non-fannie mae”. We just don’t let folks railroad us any more!
Carol