All Forum Posts by: Account Closed

Quote from @Mitch Messer:

I don't understand: If you truly want to protect the PL, why not close with a title agent?

1. You'll want your private lender (PL) to have a lender's title insurance policy. Your current approach leaves your PL exposed to any title flaws that might arise.

2. You'll want your PL named as lender on the property insurance policy. Who's going to ensure that this policy is in place?

If it helps, put yourself in the position of the PL.

What happens if the PL wires the 80% to your business account and then you get hit by a bus? How would the PL ever get their money back?

What if you did buy a property at auction, and then before you recorded the deed, you got hit by a bus? How does the PL prove that a deed of trust ever existed?

Title companies and closing attorneys exist for this specific purpose.

Why not use them?

Hi Mitch,

Thanks for your reply - I agree completely. My goal is to be able to write cash offers. I presume I could still write in loan amounts while waiving loan and appraisal contingency. This won't solve for auction properties though, right? At least at the court steps... not sure how that will work with online auctions via Xome or Auction.com.

It sounds like I may need to capture this funding arrangement under a different instrument. Potentially a personal loan. In both your scenarios, the lender should be able to recoup their investment provided there are no other creditors (or at least liabilities that exceed assets). Another option may be to secure the loan using primary residence as collateral.

I have an opportunity to raise capital with a private individual at a flat interest-only rate as a way to reduce interest charges and eliminate origination and service fees. I'm looking for ways I can "protect" this private lender. 

In theory, this is what I'm proposing -- I'll fund 20% and cover closing and rehab costs. Private lender will wire ~80% to my business bank account shortly before close. In essence, it is a cash offer. I am assuming I can write the offer as cash, so long as the private funding is guaranteed otherwise I may put my EMD at risk. For non-auction properties, I'm assuming the title company can draft the deed of trust and promissory note and record at close? After all, most lenders just use the standard Fannie Mae template... For auction properties, I'm assuming once I purchase a property I can draft and record the deed of trust following recordation of the conveyance?

Then, upon resale, does this private lender simply inform the title company of the payoff?

Is there anything I'm missing?

Thanks!