Posted by William Bronchick on February 12, 2008 at 10:54:22:
You hit the nail on the head.
wrap mortgage - Posted by ken in sc
Posted by ken in sc on February 12, 2008 at 08:47:33:
I am curious…
as an agent, if I help a seller sell a house to an individual on a wrap mortgage, and the buyer has less than stellar credit but gives say 5% down, do I have a worry if the Buyer quits paying later, in that I had a fiduciary responcibility to the Seller and advised him to do this? Even if disclosures are used and it all closes at an attorneys office? Also, the slight but still there risk of the due on sale?
At 44 yrs of age, I am too young to remember the 80’s when there was more of this going on.
Re: wrap mortgage - Posted by Wayne-NC
Posted by Wayne-NC on February 20, 2008 at 18:12:20:
Ken, have you considered all payments on the wrap mortgage go through an attorneys excrow account? Also, all payments on the underlying mortgages? This would help solve all the responsibility issues. The first missed payment would be handled accordingly.
Re: wrap mortgage - Posted by William Bronchick
Posted by William Bronchick on February 12, 2008 at 09:53:53:
If the seller is represented by an attorney, and he advises the seller of the risks, you are fine. There’s been plenty of cases decided on this issue in the 80’s when the due on sale was a bigger issue and the courts have concluded it’s not unethical for an attorney. Certainly brokers are not held to a higher standard of fiduciary than that!
Re: wrap mortgage - Posted by ken in sc
Posted by ken in sc on February 12, 2008 at 10:52:46:
Thanks Bill, that’s the thing. Here in SC the normal way is for a seller to have an agent, then the buyer hires an attorney to close the loan, so the seller never really has an attorney.
I would imagine the safe way to do it would be for the seller to choose the attorney who closes the deal and have that attorney represent him. This attorney could still be paid for by the buyers closing costs, as long as all was disclosed. With the slower market and the demise of the subprime loan market, I see this as a great way to generate sales as long as everyone understands what they are getting into. For example, if a house is worth 120-130K with 115-120K owed, it might sit for 4 or 5 months not selling because the seller cant lower his price to the low end to sell quickly, due to the RE commission. But if offered with owner financing, it could be sold for 130, and wrapped with a slightly higher interest rate. The seller had no equity anyway, I can get a fee, and the buyer can use almost all his cash as downpayment rather than paying 2 or 3 points for a subprime loan. Since this deal is too tight for me to take sub2, it could at least generate a fee for me with no risk…at least that’s my thought at this point. I am thinking of setting up a servicing company for these, or subbing that out if I can find someone good to do it.