Posted by Brian M. Powers(MI) on September 10, 2001 at 17:11:50:
Hmm…I must be off base on something because I got the whole double wrap idea from my new Bill Bronchick Alternative Real Estate Financing course. I doubt he would recommend a strategy that left one exposed to the risks you point out. I must have completely misread that portion.
Double-Wrap Question - Posted by Brian M. Powers(MI)
Posted by Brian M. Powers(MI) on September 09, 2001 at 22:56:41:
I am going to buy a property on a mirror-wrap (ie buying on a Land Contract that mirrors the underlying mortgage) and then sell owner -financing and wrap around my Land Contract I have w/ the seller.
I am going to have the seller place the deed in escrow to be released to me on fulfillment of the terms of the contract. Should I record a performance mortgage to secure performance of the Land Contract I have with the seller and protect my interests?
The sellers payments are PI only. Taxes and insurance ARE NOT excrowed. The seller just re-fi’d 3 months ago.
a. Do I have him change his policy to non-owner occupied listing me as additionally insured or do I list my buyer as additionally insured? How do I insure my equitable intrest??
b. Does my buyer typically pay for the taxes and insurance? If so, since there is no escrow set up, should I set one up and have my buyer pay into the escrow account each month to cover taxes and insurance??
Thanks for all the input!
Re: This could be fun - Posted by Ed Copp (OH)
Posted by Ed Copp (OH) on September 10, 2001 at 14:38:34:
Lets see now, you will have sombody holding a deed made out to you, to be delivered when you pay off your contract. This is O.K.
A performance mortgage might just be a good idea, and I would also take a look at recording the land contract to protect my interests. Recording of the land contract is required in my state (probably not in yours).
Bear in mind all of this will not stop the seller who now holds the deed, from encumbering his equity. In other words he may still place a second mortgage on the equity that he holds. He may also get divorced, or get sued and have another judgement placed on the property. So there is risk there that is not easily eliminated.
You now talk about selling on yet another wrap, which is unstable at best. You are now in the mix, at risk too. Someone could get a judgement against your wrap as well if you were to be sued and found liable.
Then you mention the payment (or not) of taxes and insurance, not in an escrow account at present. An escrow agent would be a big help in this matter, and personally I would look at disposing of the property by lease/option rather than another wrap. I think you would have better control of the situation.