How do I do this...?

[Herm M.]

The short sale lender wants to close by April 15th.

Let's say I use bridge funding, that means the C buyer would need to close around April 18th.

My title company has told me that a land trust is needed. Reason:

So the B buyer's name is on title and C's lender won't have an issue seeing a different name on title (therefore, they can start working on the financing immediately).

Is this correct? I've heard some conflicting information as well. I've heard that C's lender won't be interested in working on a deal like this if there's a land trust.

So that's option A...the land trust.

What's my other option? If I don't use a land trust, party A will be on title until April 15th.

If that's the case, how is it possible for C to close on April 18th?

Will C's lender be willing to work on the loan if they see a "contingent upon B obtaining said property" contingency in C's purchase contract?

Can we show C's lender the A-B contract to show that B is in the process of obtaining the property? And if we do that, isn't there a risk that C's lender sees that B is purchasing for X amount of dollars, and then C's lender will refuse to give C a loan for the purchase price of Y dollars because of the 50k difference?

What are my options? I keep hearing different things, and don't want to screw this up.

[Scott Hubbard]

Originally posted by H Mann:

My title company has told me that a land trust is needed. Reason:

So the B buyer's name is on title and C's lender won't have an issue seeing a different name on title (therefore, they can start working on the financing immediately).

Is this correct? I've heard some conflicting information as well. I've heard that C's lender won't be interested in working on a deal like this if there's a land trust.

Potential problems:
1. If your approval letter names a specific buyer, then using a land trust now will mean you will need to the A lender to accept the Land Trust and amend the approval letter.

2. Even though B buyer's name is in the land trust agreement, this does not necessarily mean they will still underwrite. I have experienced underwriter's unwilling to underwrite due to a Land Trust being the seller.

3. Most underwriter's will be suspicious of a Land Trust filed, transferred, and recorded within such a short time frame.

If your C buyer is using a mortgage broker or large institutional lender, chances are they will not be able to underwrite anything unless you close an hold for 30 days or more. They also may not underwrite a land trust at all. Wells Fargo, in January, published lending guidelines and underwriter's cannot fund a Land Trust without minimum seasoning of at least 120 days.

This means the interest in the property would have to be recorded for at least 120 days.

In conclusion, I disagree with your title company stating you need a land trust. Since you are already on the clock, I do not believe it will help you in this case. Additionally, it can create a whole new set of problems.

Originally posted by H Mann:

So that's option A...the land trust.


What's my other option? If I don't use a land trust, party A will be on title until April 15th.

If that's the case, how is it possible for C to close on April 18th?

1. If your spread allows, find a lender willing to float you for two or three weeks while Buyer C's underwrites. Close and record in late March. Make sure your C Buyer has a significant EMD. If your lender funds and C cannot close, then assign the EMD to go to lender.

2. Seek out a lender who underwrites, funds, and seasons loans in house (sometiems referred to as a warehouse funder). These lenders will require you to close and record, but that should only take a 4 or 5 days maximum. If takes some doing, but they do exist.

I have two smaller lenders I use who will fund as long as I close and record. In Arizona, this can be done on the same day. In California, it takes at least two.

I would level with the C buyer and explain your situation and that your experience tells you that some lenders do not want to be creative and suggest to him a lender of your choosing. Offer to pay for the appriasal, home warranty, or home inspection for his troubles.

3. Find a JV partner on the deal. I sometimes use a money partner (when his wife isn't complaining) to fund the loan. I have used HML's but this type of loan is not their bread and butter. HML's are really a long shot.

Originally posted by H Mann:

Will C's lender be willing to work on the loan if they see a "contingent upon B obtaining said property" contingency in C's purchase contract?

Again, you really need to keep in mind very few lenders can actually do these deals. The ones doing these deals are typically smaller in house lenders. I would ask the C buyer who their lender is. If it is big 5 or a local mortgage broker, chances are they will not fund this deal.

Originally posted by H Mann:

Can we show C's lender the A-B contract to show that B is in the process of obtaining the property? And if we do that, isn't there a risk that C's lender sees that B is purchasing for X amount of dollars, and then C's lender will refuse to give C a loan for the purchase price of Y dollars because of the 50k difference?

1. Determine who the C buyer's lender is. Make some calls to their office and ask to speak to a loan officer or processor. If you can get to an underwriter, even better. Explain your situation, the A to B then B to C. Do not get into particulars. Do not say double close or simultaneous close. Just explain that you will be on title for 2 or 3 days and you want to know if they will underwrite a loan without you being on title yet.

2. If it is a big five, a local broker, or they told you they cannot close, then your going to have to "level with the C buyer and tell them if they are willing to use your preapproved lender, you will assist them by paying for the appraisal, home inspection, moving costs. You can also offer to paint, carpet, or tile. Do not offer them points or closing costs as this is a RESPA violation.

Bottomline, a traditional RE transactions pins seller against buyer and agent against agent. For this to work, you need a cooperative between agents and especially between principals.

Your success depends on being able to keep your C buyer engaged in the transaction. And, much like a realife engagement between two people, you may need to get down on one knee, open up a velvet box and reveal that shiny trinket and dazzle them!