Is this broker right? - Posted by Jack KY

Posted by James Strange on July 12, 2003 at 14:21:29:

Your broker is right.

Is this broker right? - Posted by Jack KY

Posted by Jack KY on July 12, 2003 at 10:22:35:

Note: This was cross-posted (slightly modified)on the legal discussion forum.

I have a C corp that manages my rental property, does rehabs and flips.

I decided to keep a rehab property for rental that was originally purchased 3 months ago in the c corp. I am in the process of buying it from the c corp, which will deed me the house in exchange for debt relief.

I, as a hard money lender, loaned the corporation, a separate legal entity, the money to purchase and rehab the house. The loan principal plus the interest on the loan is MY purchase price of the house. This price is around the low end of fair market value.

I applied for a loan based on MY purchase price to pull out my money for other RE purchases.

But the mortgage broker says that the lender will only lend on the corporation’s (much lower) purchase price.

In an email, the lender says that “…this would be considered an arm’s length transaction meaning that the corporate veil is not really a separate entity, you would be buying the home from yourself. Which is a big no-no.”

He went on to say, “One of the biggest sources of fraud that has lead to very high foreclosure rates is “flipping”. All new appraisals will have to list a sales history from the property over the past three years. So, it would be known what the last purchase price was, you would have to sign the deed as the president of the corporation and the new owner so it just wouldn’t work.”

Is this guy right? Is buying a property from a corporation that I am president of the same as buying it from myself?

Is there any chance of finding a lender who will do this my way?


Jack Stivers

Re: Is this broker right? - Posted by Jasonrei

Posted by Jasonrei on July 13, 2003 at 10:42:48:

I bought a duplex and fourplex earlier this yr that I hope to do something similar with.

  1. That guy is right. Joe Smith, Inc. selling to Joe Smith, it’s all the same guy to the lender.
  2. You might be able to find a lender to loan you the original purchase price plus documented and verifiable repairs.