All Forum Posts by: Chris DeSisto

@Ronald Rohde

Yeah SC is a judicial foreclosure state. You can do a release of bond with a contract for deed and a deed in lieu if it is a Note and deed of trust. If they agree to it of course. Which I would think is a much better alternative than a full foreclosure for both sides. But I am sure emotions can cause logic to be thrown out the window. Maybe in some instances it makes sense for the buyer to go into foreclosure.

@Jerel Ehlert

Well I am not in Texas so I'm not sure how much applies to me being in SC. As far as just selling it on a wrap for 100k I was assuming arv was 100k and you bought it sub2 for 70k, in the example, which you may or may not have been referring too.

I have a RLMO who works with seller financing and making sure the buyer has the ability to repay.

I'm still learning about the insurance and getting a power of attorney in regards to the property. I guess the original owner could try to cancel the insurance but wouldn't he put himself at risk of getting the loan called due even more so? Wouldn't it kind of screw himself over?

My understanding is you can't do balloons but you can create an ARM that changes after 5 years and can only go up 2% per year and cap at like 6 above the amount you start with. What I am not 100% sure on, can it be 9.5 to start on the wrap? Really whatever the amount that is reasonable for the property, 9.5% on a 500k home would be way over rent amount values. The ARM creates a 'balloonish' result. This may can help get the loan out of the original owners name sooner. Still learning..

Also, a seller can do a balloon for their own property if they only do it once per 12 months. Assignments of a contract, i don't think apply to Dodd Frank.

@Rick Pozos

So if I turnaround and sell it on a CFD I am not wrapping it? I am just selling it that way as if I sold it on a lease option? I can create an arbitrage with a CFD the same as if I wrapped it with a note and dt. Or anytime I sell it, it's a wrap in a sense? The contract is wrapping around the underlying loan?

If you are doing the note and dt, why are you doing it that way, cause you have to or is it an easier way to sell it? Pros and cons for buyer and seller?

@Joel S.

Well what is the foreclosure process in Texas with a note and deed of trust vs land contract? Here in SC it is a year or more process if it is fought, I believe.

Honestly, I am still trying to understand the default difference between the two options. This is why I am asking. Trying to learn what is the best option for myself, seller and buyer. If I am in the middle I would do my best to make things right. Everyone would know the situation going in.

If I pass the deed off then is the original seller worse off? I am not the holder of the deed, I have less control, correct? If I hold the deed I need to be the most ethical person involved. I would do whatever I could, reasonably, to make sure the buyer is qualified and has the ability to make payments. I don't want to go through a default situation and I'm sure the buyer doesn't either. I am trying to understand all of this stuff the best that I can.

@Wayne Brooks

I assume the same with any sub2? If a seller is selling sub2 they would be disclosed of the risks. I would say if the wrap buyer stopped paying, I now have to make the underlying payment to keep it current. Try cash for keys and the buyer release the contract with a release of bond (forget the name). Most likely the seller was in a bad situation to begin with and probably about to be foreclosed on and possibly back in the same position they were before they sold sub2, so no difference.

Question was what do you sell the wrap on? A contract for deed or a note and deed of trust? I assume a CFD in case the buyer defaults it might speed up the process if it went bad.?

When you buy a property sub2 for say 70k then wrap it for say 100k to an end buyer, the actual wrap, is it a contract for deed or is the wrap a note and deed of trust to the end buyer?

I assume you don't want to give up the deed, so do most or do you always do a wrap with a contract for deed?

Example: Say there is a distressed seller and they have a loan on a house that is 190k and it is worth 205k If you were to wrap their existing loan with a contract for deed for what they owe, 190k and the same interest rate (say 5%), $1300 monthly PITI but instead of the term being 27 years you have a balloon for 5 years. This gets the seller out sooner than if you took it sub2 and wrapped it.

Now as far as dodd-frank and balloons goes I know you can't use them if you are selling your own properties 3+ per year. But what happens when I get it under contract with a purchase agreement from the seller (like a wholesale deal)  and you agree to pay them say 3k at closing. What if you go out and find an end buyer and they are actually going to live in the property. They agree to pay 203k for the prop with 13k down. You give the seller 3k and you keep the 10k. Now if I assign the contract off to the buyer is this technically a sale between the seller and the buyer, so a balloon could be used? My understanding is that a person selling one house per year can sell with a balloon and not even verify if they can pay the loan back, under dodd-frank. Now if I were to do this I would still get them involved with a RMLO to make sure they could pay even if technically you wouldn't need to, assuming that in this situation the seller is selling directly to the end buyer. The investor is in and out of the deal like a wholesale. 

Also, if the title is not transferring until the CFD is paid off, does this trigger the due on sale clause? Leaving the insurance in place and have the new buyer get their own insurance. Thoughts?

@Stephanie Irto

The lease option is at fair market rent with this lease option. No rent credits etc, keep that money and put it in a savings for the down payment later. Plus the tenant is locking in today's price, so when they go get a loan, ideally it's gone up in value and they are buying into equity. Also, the upfront option fee is about 3% (which isn't a huge amount) but they also need some skin in the game. The fee is applied to the purchase price, if they choose not to buy they lose that option fee. They are in control though, buy or not. Most of the buyers need time to get their credit right too.

As far as what I was asking, I am trying to find a mortgage broker who knows how to apply that option fee as a down payment later when they go to purchase. I know it's possible but I can't seem to find a broker who has experience doing it. It seems like it's a big secret from people who know how to do it..

I would love to know how it needs to be documented so a buyer can apply it because I think it would greatly increase their odds of buying.

Any broker able to do loans in SC, that have worked with lease options? Looking to find someone who can apply consideration money as a down payment if/when a buyer goes to get a conventional loan.

@Matthew Klema

I have the same question, ever find out the answer??