All Forum Posts by: Alfred Bell

DAMN! The legal problem with ex-client and a new big client took up all of my week. I've really fallen behind on this owner carry project and wish I could've just concentrated on it alone.

Anyway... I'm back. Thanks for your patience Marc.

I couldn't sleep so I got up early and decided to take advantage of the quiet time and get back into this. Felt disoriented so I just started at the beginning and read through all 5 pages of this thread and took notes.

Collecting my thoughts now and preparing to start taking action. Will probably make some more posts shortly to clarify some points, etc.

Unfortunately, I couldn't do any work on this today. In meetings and talking with attorneys all day regarding this legal threat against one of our businessess (may have to go into an arbitration). Hopefully will get back on this note project tomorrow.

Ok, will do this tomorrow (Monday) morning. Thanks.
(My wife has just received a legal threat from a disgruntled client, "the client from hell", and that may throw off my schedule or take up some of my time tomorrow.)

Yes Marc I'm going to do that research. That will be the first step or one of the first steps on the battleplan. I'm going to call loan officers of local banks in Palm Desert, give them the scenario that I want to sell my condo with owner financing and ask them what the borrowing requirements would be if someone came to them for the loan.

As I asked earlier, it would be much appreciated if you would be willing to describe the scenario and give me any exact questions that you want answered by the lenders. This will ensure that I do this properly and get the full data we need. Thanks, Alfred

I'm next going to draw up a battleplan to sell this condo with owner financing. All the needed steps in proper sequence and those that can be done concurrently. Those steps that are currenlty moot will be marked as such. Meanwhile I'm going to try and talk to some professionals about what is the optimum way to handle the loan origination. Thanks, A.

Marc: This is in response to your response of May 17 09:43 PM. (Re: My 11 Questions)

1.
MOOT -- Whether loan needs to be originated by a licensed calif professional or not. This has got me concerned I want to figure out how to do this if Bill Gulley is correct about the legal aspect and it will give the note more credibility. I want the note to have the highest credibility possible. Note: you saw the email from my escrow officer that I posted above: she is used to preparing the note and TD herself using title company legal docs.
2.
CONFUSING -- Doesn't make sense to me. Who else would negotiate and hammer out the terms for the loan/note with the condo buyer but me?
3.
CONFUSING -- Why not a Form 1003? How else am I going to have solid evidence in my package that documents the buyers financial condition and credit status at the time of condo purchase?
4.
UNDERSTOOD.
5.
UNDERSTOOD.
6.
UNDERSTOOD.
7.
UNDERSTOOD.
8.
CONFUSING -- Why if an agent brings a qualified buyer to me is he not my condo buyer? I'd rather sell to someone with no agents involved but if an agent brings me a willing buyer (and I don't have any other prospects) I think I'd be willing to pay the 3% commission in order to get this condo off my plate. What wrong with that, what am I missing?

Also -- I'm very limited in marketing as FSBO to potential buyers out there who are looking to buy without representation (point in fact: I've got this condo up on a bunch of FSBO sited with a reduced price and owner financing... haven't gotten one call). I need to let the world know that this beautiful condo is available with owner financing and the MLS is the only way to do that. I've sort of resigned myself to the fact that I'll be paying a 3% commish if I'm gonna sell this.

Am I missing something here?
9.
UNDERSTOOD.
10.
UNDERSTOOD.
11.
CONFUSING -- As short a term as possible and no balloon? How would this work and why would I want to do this? How would I sell the note in a year or two? I think the least a mortage loan can be in Calif is 5 years. That gives buyer plenty of time to get their act together and refinance. A mentor of mine (foreclosure expert, instructor, investor, note buyer, attorney/non-practicing suggested... 8 year term/amortized as a 30 fixed/6%+/balloon payment... as a great note to market, and allows my partner to hold it for as long as he wants or until it matures.

We need to get this clarified. I want to get as close as possible to a highly credible/highly valuable note as possible to guarantee that it can be sold down the road for a decent price.

Marc, is Michigan a DOT or mortgage state?

Thanks,
Alfred

Not sure I understand what you guys are talking about regarding significance of condo status and ownership. Anyway, here are the facts...
Condo is vacant (and it is unfurnished).
Was never occupied by me or my partner (altho I could say it was and who would know otherwise).
Will either be sold or rented.
Title is in a Calif S Corp (Dry Mountain Inc.)
This is my money partner's entity that he set up earlier this year.
Anything else need to know on this subject?

I don't know about this. Getting all hung up on sigificances here. Shouldn't be so time consuming and complicated. Trying to find a Calif professional I can talk to and sort this out so I can get into motion.

My first response is that this is not that complicated. Firstly, Bill Gulley, you are in Missouri which is probably a mortgage rather than a trust deed state. Calif is a TD state and is very liberal (I'll have to find out if they've drafted there own Safe Act or follow the Fed's).

People do this all the time out here. If you got a prom note and a TD properly written and recorded you are good to go. I don't think the state is running after people for predatory lending. Probably the only thing that you have to really worry about is usury laws. This is just my gut feeling. Somehow I'll figure out how to clarify this stuff so I can safely and confidently move forward.

Got pulled off onto something else (wife's business). Here is a response that I got from my escrow officer friend who owns and runs her own business.

MY QUESTION:
I thought that I could just find a buyer for my condo... work out the terms of the owner carry... draw up a promissory note myself... do the transaction through escrow (documenting the sale as best as possible)... season the note... and then sell the note. But I've been told that my note has to be originated and underwritten in compliance with the SAFE Act and California law and that this should be done by a licensed mortgage originator if I want the note to be valid and marketable so that I can later sell it to a note buyer/investor. Is this the case?

HER ANSWER:
Um….not sure what he means by the SAFE Act. There are many new laws (that may sunset soon) with respect to loans if the borrower is in default.

We prepare the purchase money trust deeds and note on title company forms, which are in compliance with California law. I also use the long form of the trust deed so that the terms are listed out. Plus you will have title insurance.
In my 35+ years I am not aware of any of our owner carry loans be in valid….
Hope this helps…

Bill Gulley:

Thanks for the input.

Hmmm... ok, you may have very valid points here. I wouldn't know. This needs to be sorted out. I'm pretty much at a standstill until it is.

What do you say to this Marc?

It seems to me that lots of owner carries are done "informally" here in Calif. I think the owner/buyer work out the terms and then either the owner or escrow officer or an attorney must create the promissory note.

I don't want to violate state or fed laws and I want my note to be as valid and marketable as possible. Need to get the facts on this matter.

As an aside... are there any California experienced/professional note investors out there? And any California mortgage originators?

I MUST find out how to proceed CORRECTLY with this. Maybe I need to talk to a licensed professional mortgage broker here in Calif or maybe a real estate attorney?

(I'm about to review and respond to Marc's May 17, 9:43 post with any questions or needed clarifications. I need to keep moving forward.)