All Forum Posts by: Ari Bauer

Hi Sebastien,

The way that I would evaluate this is to decide if your willing to put up 9k in order to make/save 13k over 2 years. Based on you refiing in year 2, your return per year on the 9k will be 75% which is a pretty good return.      Of course, this assumes that you won't be stretching your cash position too thin. It's it very important to have adequate reserves, especially in our current market.

In summary, the Home Possible mortgage makes more sense for you based on the returns, but if you need/want to keep a higher cash reserve, than the FHA mortgage may be the right choice.

If the daughter would like to short sale the home, she should contact a real estate agent that specializes in short sales. The agent will contact the lender and initiate a short review, which will include ordering an appraisal. Once the appraisal comes in, the bank will accept 95% of the appraised value as the sale price.

The agent is paid up to a 6% commission of the sales price by the bank, so it's a free service for the seller.

Let me know if you have any more questions.

I can't tell you if they will likely be a deficiency Judgement or not, that is a question that you should ask an attorney.

However, I actually closed a short sale with Wells Fargo a couple months ago where there was a HUD partial claim, and part of our negotiated agreement was that they waived their right to collect a deficiency judgement against my client.

As far as how a foreclosure/ short sale would affect your credit score, that's not really my forte, but a quick search online seemed to imply that what you're saying is correct.

I sent you a message in case you would like to have a phone conversation about how the for 

forclosure/ short sale process works.

@maurice grant

When a home is sold at a sheriff s Sale the HUD partial claim will be paid off from the proceeds of the sale so the claim will no longer encumber the property.

If the home is sold through a short sale, the HUD partial claim will be paid out of the sale proceeds.

In regards to your 3rd question, filing for bankruptcy will have no impact on the HUD partial claim.

What filing bankruptcy will do is grant an automatic stay to prevent creditors from collecting a debt from the debtor. However the bank will then file a motion asking the judge to allow the foreclosure to proceed, and if the judge allows this, the foreclosure will proceed as normal.

I'm happy to answer any other questions that you may have.

Disclaimer: I am not an attorney and this is not legal advice.

It's possible to buy a short sale with a 1031.

A problem that you may run into is if the bank dosen't approve the sale prior to your 180 days being up, you won't be able to close and the 1031 will fall through.

Therefore, you should have a backup plan in case the short sale doesn't get approved fast enough.

The 2nd is with liberty savings Credit Union.

Until now I have been dealing with with the attorneys office that's representing them. 

I had sent the subrogation agreement and with the attorneys letter for their review but that didn't seem to help anything.

After speaking with the attorneys office and explaining what a HUD partial claim is, they still don't seem to understand.

I think your advice of escalating it is what I'm going to do. What I realy need is for someone at the bank to understand what The HUD claim is, after they understand what it is, there shouldn't be any problem getting their reapproval

As this is the only thing holding them back from reissuing the approval.

I was hoping someone could help me out with a deal I'm working on.

I'm negotiating a short sale on a property with three liens, a 1st mortgage, 2nd and a HUD partial claim.

I've reached agreements with the 1st mortgage for a short payoff with the HUD claim recording the total amount owed.

The second lien had originally agreed to a payoff of 2k (about 5% of what they're owed). All went well until I sent the 2nd a preliminary Hud1 and they saw that the HUD claim (which was recorded in 3rd position) was receiving 6x the amount that the second was receiving.

At that point, the 2nd stated that they wanted to know why the HUD claim ( which is in 3rd position) was receiving more then they are.

As far as I understand it, even though the HUD claim was recorded 3rd, they still have a higher claim because of the subrogation.

I had an attorney draft a letter to the 2nd lien holder explaining this, however they are still saying that the hold a higher position then the HUD claim and as such won't agree to the Hud claim receiving that amount.

Does anyone who has dealt with a deal like this have any suggestions as to what I can do to help the 2nd understand that the HUD claim is in a higher position then them?

Thanks

@Daniel Dietz

Perhaps you can have Frank put the 300k down and take out a 300k loan to purchase the property and then shortly thereafter cashout refinance it  at 75%ltv (450k).

This would allow you to return 150k to Frank.

By structuring the transaction this way, Frank will have access to the cash he wants while enabling him to defer taxes on the whole 300k.

I believe this would be a permitted transaction but I'm not an expert on 1031 so you should definitely double check with @Dave Foster.

In general, syndicators use a combination of both debt ("traditional financing) and equity (the syndication piece).

On the debt side, they would source say 70-80% LTV (from Fannie, Freddy, a bank etc...)

and they would have an interest rate in the 4-4.75% range.

On the equity side, they would source 70-90% of the needed equity (from private investors, private equity etc...) and provide the additional 10-30% from their own capital.

In exchange, they usually give the the investor 70-80% of the cashflow and upside, usually yielding the investor 12-20% on their money. The reason that the investors require these higher returns is because they hold a much riskier position than the bank, as if the property value falls by say 10%, the investors lose half their money.

In the same situation where the property value falls by 10%, the bank still has their position covered by the property value and they don't lose anything. So as you can see from this example, the bank is in a less riskier position and thus does not require as high of a rather of return. The reason the banks aren't interested in lending at a higher LTV is because they are in the business of lending on collateral, not in real estate investing.

So to answer your question,syndicators use debt as that is they're cheapest option. However, since the banks would not lend then them full amount, they are forced to use a different sources (private investors etc...  who require the higher rates) for the amount above what the bank would lend.

@Tyler Mullen @Chris Mason @Harjeet Bhatti

Thanks for the responses.

The reason why he cannot transfer the deed back into his name or even to a revocable trust is that he will be disqualified from medicaid.

Portfolio lending may be an option if he can find a suitable lender but hard money is out of the question, as he'd rather sell then pay those high rates.

Does anyone have any suggestions for a portfolio lender that may work for this?