All Forum Posts by: John M.

Sorry, the original post is mine -- I don't know how I became N/A N/A, must have not logged in correctly.
Anyway, I agree with Anthony and am leaning toward a percentage of gross sales or gross profit instead of net profit. That would eliminate my concern over net profit manipulation, but the problem is that there may be months early on and during slow months (business will be somewhat seasonal) that there isn't enough to pay both me and the bills. Navi is correct that it is basically a loan, but with a percentage of the business and profits instead of interest. Still negotiating the basics of the deal now, not even discussing the details yet. The equipment comes with the building. All of the money would be spent on insurance, advertising, lease, security deposit, initial inventory, etc. (there is no collaterial).

They would like basically like to have a loan to get the business started and then have us out of their hair after it's paid off. We would like to have our capital repaid and an opportunity to share in the profits since we expect/hope the business will do well. I'm pushing for a percentage of the business in order to create residual income from the profits for as long as the business operates, which I would hope would be many years. What kind of deal would you suggest?

Jason, what kind of work do you do in T&T?

So what's your question, Dan? The bank can't deal with you to do a short sale without the full cooperation of the owner, and you can't get around the agent unless the property goes to the bank at the auction. The agent's rights and commission are protected by his contract with the owner. On the plus side, it's in the agent's best interest to close the sale before the auction or else he looses any chance of getting paid.

I can't imagine what contract you have with the agent unless you contracted with him as a buyers agent. I presumed you had a purchase and sale contract with the OWNER (which does have language to protect the agent, but is primarily between you and the owner, not the agent).

I see your options as:
Buy the house now and pay whatever price you can negotiate with the seller and agent which would likely be the full loan payoff amount plus the agent's commission, plus any of the seller's closing costs.

Hope that the agent is able to get the short sale through. He may be incompetent or poorly motivated, or he may be doing everything humanly possible. Sometimes banks are harder to deal with than the government. There can be so many bean counters, required approvals and signatures, unexplained delays, etc., etc. that it's amazing they ever accomplish anything. You could talk to the agent and ask him to let you be more involved in the process and help him out, or you can track down the owner, get his permission to work with the bank, and try to do the short sale yourself (the agent will still get his commission from the sale).

If either of these options don't work, then all you've got left is the auction or the REO route. If you try to buy it from the bank as a REO, nobody said you had to wait months for them to re-list it. You can send them an offer or start trying to buy it from them as soon as the auction is over (although don't expect them to move any faster then than they are now). Lacking patience can sometimes be very expensive. You decide how much you want the house.

Dan, it sounds like you already know what the bank's bid is going to be and that's more than you're willing to pay. Pursue the short sale, but don't count on it going through. Plan on going to the auction since sometimes the bank will bid less than they're owed in an effort to avoid getting the property back (one drawback to trying to do a short sale is the possibility that the bank may be less likely to lower their bid if they know they have an interested party).

Call the county office that handles the sale (often called Master-in-Equity in SC) and ask them to explain the sale process and where you can go to view the file. Read the notice of sale in the newspaper or file. If possible, be prepared to bid on the property if the price is agreeable. You will normally need a 5% deposit on the day of sale. If you need to finance the property, it IS possible to get a loan by the time the balance is due, but work this out with your mort broker / lender ahead of time since you could lose the house and your deposit if they can't get the loan done by the time you have to pay off your bid.

Assuming the bank get's the property back, submit your offer to their REO dept. Unless there's a lot of equity, the bank will likely take an offer for the outstanding loan balance minus the fees and penalties -- perhaps lower depending on the relationship of that balance to FMV.

Around here, banks have finally started lowering their minimum bids at auction to below the judgment amount in an effort to avoid getting some of these houses back as REO's. But for the most part, they still bid up to the full amount due and then deal with it as an REO.

However, there are a couple of investors that consistently know which properties the bank is going to write-down before the auction. I'm wondering how they are getting this information. My first thought is that they have an inside contact at the lender/bank, but the lender is different for most of the properties. Also, the attorneys handling the foreclosure are different for most of them. The agent handling the bids for the out-of-town attnys doesn't normally get his bid instructions until the morning of the auction (if he's being honest with me -- and I think he is).

Does anybody have any ideas about how to get this info?? If they are only getting it the morning of the auction, then I'm not concerned, but if they are getting it a day or more ahead of time (and it appears that they are), then it puts me at a distinct disadvantage.

Corey, try to find out what is going on with the property. I once had a situation like this and it turned out that my offers were being refused because there were a couple of owners (siblings that inherited the property) that could not agree about what to do with the prop, so it just sat. It could also be that there are title issues that prevent the owner from selling or they may owe more than they can sell it for. In either of these cases, the home will often/eventually go to foreclosure where it might be purchased reasonably while getting any title issues cleared up at the same time.

So yes, talk to the attorney and explain that you are interested in the house and try to find out what is going on with it. Also try to locate the owner and do the same thing (who did you submit your offer to??). Identifying the problem is the first step to overcoming it. If they aren't selling because they're upside down, you may want to look at doing a short sale.

If the problem is title issues or a tax lien, your best bet may be to try to buy the house at the auction when it comes up. (if there's a tax lien, be sure to factor it in as it will not be erased!!)

The properties that I want to transfer to my LLC are properties that I have owned for several years in my name. My new rentals are going into LLC's, but these are properties that I put in my name before I knew any better. So what I'm reading is that they already have my personal guarantee in the form of the mortgage, and all I need to do is file a quit claim deed and there should be no problems

JMac

Could you provide some more details, Dave? How do you "do a personal guarantee on the loan"? I recently asked a question about this and everybody said to just quit-claim the properties into the LLC and not say anything about it to the lender -- nobody mentioned doing a personal guarantee. See my post in "Tax, Legal Issues, and Contracts"

If you're suggesting that I contact the lender and offer to send them a letter stating that I personally guarantee the loan, I don't think that's gonna fly. When I called to ask them (Wells Fargo) about moving properties into my LLC, they told me straight out that they would not allow that, that they would call the loan due. Everybody says that they won't do it, though.

JMac

OK, so I've finally gotten things in place to start moving my rentals over to my LLC. What are the tax implications of doing this? Would this be considered a gift? How should I report the transfer on my return and on the LLC's? Thanks for any advice from those who have done this before.

JMac

Thanks Kathy for the great tips on finding someone! The deal I was looking at has passed (bought by the plaintiff/2nd note holder). It may be available as an REO now, but have been too busy to check and have better looking prospects in the works. I'm going to print and save your post for future reference, though, since you have some good suggestions. Thanks.