Question for Ed Garcia - Posted by Lori Samson

Posted by Lori Samson on November 03, 2000 at 01:19:39:

This is sorta what I thought but interestingly I was presented this by a mortgage broker. I had figured that possibly using a PACtrust to get it back into my name but… yes I figured fraud was written on this somewhere. I think I’ll print this and show it to the broker. Thanks


Question for Ed Garcia - Posted by Lori Samson

Posted by Lori Samson on November 01, 2000 at 18:20:39:

Hi Ed,
I have a question that I would like your feed back on. Can I buy a property in my Corporate name and flip it to myself at full market value, closing simutaniously so that I can pull all my money out of it? I would then have the title transfered put back into the Corp. name after closing. I would then lease option it out to service the debt. I would make little to nothing on the lease option less the down payment and a monthly cash flow and probably no tail end profits.

I haven’t done this but would like any pros or cons about this. I have 11 properties that I am considering buying and I need some cash back out on some of them and I don’t want to wait for a year seasoning and refinancing.

Any thoughts.


Re: Question for Ed Garcia - Posted by Ed Garcia

Posted by Ed Garcia on November 02, 2000 at 10:12:14:

Hi Lori,

I think that Mr. Piper did a fine job of as he put it, “take a crack it”, when he answered your question.

Lori I know that you’re an experienced investor and because of that, I think you knew the answer, when you asked the question, and you just wanted to get some other input.

First, you’ve got to know that you’re defrauding the lender. Could you get away with it? Maybe, but you would have to have an attorney, title company, or escrow company work with you and now you have an ACCOMPLICE and both of you are in COLLUSION when DEFRAUDING the lender. Let me tell you my experience with this kind of situation.

If you did one, maybe no one would take notice. Once you start a pattern and created an M/O you’re not just defrauding a lender, it’s D.A. and jail time. Many lenders are Federally insured or sell to a federally insured lenders, which could make it a Federal Offence. But then you have to have another concern. If you ACCOMPLACE is doing this type of activity with you, then they more than likely are doing it wit others and have a PATTERN or M/O of their own. If your ACCOMPLACE gets caught in foul play with others, it can come back to you once an investigation is under way. They will go through every file that you’re ACCOMPLACE has done in the last 2 or 3 years, leaving no stone unturned looking to unvail fraudulent activities committed by your ACCOMPLICE.

I was involved in a $200,000,000 lawsuit with Bank of America back in the 80s along with 42 other brokers and lenders. I committed no wrongdoing, but I can tell you it cost me over six figures in legal fees. Once law enforcement or the government puts an investigation together, everyone is a suspect. Bank of America wasn’t even the lender, they were escrow for another institution called NEMAC which I sold $37,000,000 in loans to that year. But B of A handled the escrows, NEMAC was seized and closed down.

Lori, Piper gave you one answer, another is a “WORKING CREDIT LINE”. Don’t confuse it with an EQUITY credit line. With a working credit line, you can PAY CASH for the properties, you can CLOSE FASTER, both allowing you to cut better deals and make more MONEY. You can SEASON your properties by keeping them on the line for a year and then re-financing them later. It’s cheaper money; in most cases you’ll pay 2 over prime.

Ed Garcia

Re: Question for Ed Garcia - Posted by JPiper

Posted by JPiper on November 01, 2000 at 20:23:10:


While we are waiting for Mr. Garcia to answer this question, I thought I would take a crack at it.

First, it would seem that the very seasoning that you are trying to avoid would be triggered if your Corp flips to you?but of course this is minor issue in the scenario you have presented.

Next, your transaction is obviously not arms length. Therefore, you are then confronted with the choice of attempting to hide this from the lender, or disclosing it (in which case the lender will not do this deal, the very reason you are asking the question). Assuming that you hide this issue, then from my non-lawyer perspective you will be committing fraud.

Third, even if you managed to bamboozle the lender, now when you deed it back to the corporation you will have triggered the due on sale clause. You?ll need to utilize a trust to hide this transfer. Whew, amazing how tangled this web has become.

My understanding is that you have done a large number of lease/options presumably in your corporation. If this is the case, then presumably you have created a solid income stream and/or various sales of property when the options were exercised. Why not use this track record to speak with a local commercial lender?

Perhaps you could flip a property or two, using the proceeds to roll into the other properties as a downpayment for a loan. Naturally this deal needs to present the equity to put this together.


Re: Yes, I did know you’d say that… - Posted by Lori Samson

Posted by Lori Samson on November 03, 2000 at 01:50:08:

But I wanted to make darn sure I was right. Sometimes things change so fast that I feel I had to have been on vacation in the Alps to not have known something. I am forever finding new information when it comes to loans though.

BTW- the lady with the land/home/mobil home lost that deal and we put the tenant/buyers into another home, so I didn’t loose that option fee. She got into another house and I am marketing her house this weekend for as a lease purchase. Thanks for giving some assistance in it.


Re: Question for Ed Garcia - Posted by Tom

Posted by Tom on November 02, 2000 at 15:54:15:


How would you suggest trying to set up a working line of credit with being relatively new to RE? Thanks!