All Forum Posts by: T. Alan Ceshker
T. Alan Ceshker has started 4 posts and replied 87 times.
Post: Buy subto sell via wrap question
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
@Bob P
The 1st letter we get is a letter stating it appears something may be wrong with a conveyance that occurs and they ask for contact from borrower to explain the conveyance that occurred. Then a month or so later, they will send a 2nd letter stating they are to advance with foreclosure. Then a notice of default will go out providing 30 days to cure. Then lastly, a notice of foreclosure.
During this time, the mortgage is continued to be paid and there is no damage to credit.
We will then deed the property back to the seller/borrower and show this to the lender. This will give us plenty of time to take additional steps as needed. Often we will deed the property back to a trust to obscure the conveyance. No lender has come back after this - so far.
We have only had 1 instance where the mortgage was paid off and this was due to a very low balance being owed when dealing with a DOS clause issue.
We have not had to have an end buyer sell a property; however, this is listed as one of the possible outcomes if there are issues. FYI - a lease purchase option is not one of the weapons we have to cure in Texas as they are essentially not allowed.
I appreciate your obvious experience and expertise with these.
Stay safe out there
Alan
Post: Buy subto sell via wrap question
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Quote from @Account Closed:
Quote from @Marcus Griffin:
Im closing on my 1st subto deal at $300K(240k mortgage balance, $60k Partial claim balance) Seller interest rate is 3.4% payment is $1900. I'm looking to wrap this to a end buyer for $350k at 9% interest 10% down. Should my wrap loan be for 30 years or should I include a balloon. Rent is $2200 in area. My 1st deal ever. Looking for experienced investor input.
Ok, here is some experienced investor input.
Don't do it in Texas. Yes, yes, I know, it's legal. That isn't even the issue. Do you have $360,000 available to you on short notice if the loan gets called?
You have about 30 days to cure a Due on Sale call.
a. If you do as you suggest you want to do, you no longer own the property. If the loan gets called, you can not force the sale of the property to cover the wrap unless the borrower has violated the terms of the agreement. Then you have to take him through foreclosure, which takes time and money.
b. You no longer own the property, so you can't refinance out of a note call.
c. When taxes increase, when insurance goes up, when other things happen, how do you cover those?
d. You can be sued (and investigated) if you screw things up.
However, if you have available cash on short notice to pay off the underlying note, it isn't a problem. But now, you have defeated the reason for doing the Subject To and have become a lender to someone who probably doesn't qualify for bank financing. So, you could be stuck with that money tied up for the length of the wrap.
If the Subject To teacher you learned that from told you this was a good idea, go get your money back.
Not trying to start an argument here - just detailing my experience here.
I agree with much of what you say. And the gurus have just about destroyed this industry that I have been in for 20 plus years.
We have closed well over 10,000 wraps (I use wrap to mean assumption and wrap) in the past 20 years or so. We have had about a dozen due on sale issues and we fixed each one. I have never had a foreclosure because of a due on sale issue. We simply fix them if they occur. When the 1st notice goes out, we have about 90 days minimum to fix.
The key is disclosure, disclosure, disclosure. The end buyer and seller know a fix may be needed. All agree to cooperate if the issue arises. And, no issue should arise if closed and managed correctly. We also use a trust structure to help protect the transaction when needed.
I do agree with you that having the dollars to pay off the mortgage if something occurs is best practice. But not having this should not stop you from investing via wraps. You just need to close correctly and legally.
We have several information and instruction documents we send out for free to anyone wanting to learn.
I will reiterate -- no fight intended -- just advising what we have seen, done and developed over the past numerous years.
Stay safe out there guys
Alan
Post: What would you do?
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
You have 4 choices:
1. See if it cash flows renting it
2. See if you can make dollars via conventional sale
3. See if it cash flows via seller finance wrap
4, Stay in it until 1 of the above works
Post: How easy is it to foreclose when selling S2 (Subject to)?
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Quote from @Lindsey Bodner:
We're considering selling a property Subject to (S2) -- meaning the buyer would pay closing costs and a downpayment, we keep the mortgage in our name, and the buyer would make the mortgage payments and monthly payments to us. Two questions about this deal: (1) Since its our credit on the line b/c the mortgage stays in my name, we'd put a clause in that would allow me to foreclose on the house and get it back fully in my name if he misses two payments.
Have any of you done this? How expensive/difficult is the foreclosure process in a case like this?
Thanks!!
It depends what state you are in. If in a non-judicial foreclosure state (ie Texas), it is relatively easy. You have a 20 day notice and then a 21 day notice and set the foreclosure for the 1st Tuesday of the month. You can easily google foreclosure procedure in your state.
Now for the controversial part -- if the transaction is papered up correctly, you will have a right to foreclose. From a documentation standpoint: wrap = assumption = sub to = mirror wrap = exact wrap. All have a note and deed of trust. If in Texas and if doing them correctly.
The reason for this is a note is needed (and deed of trust) to allow a remedy in the event of default and to also solve DTI issues for the seller (by showing a new lender the note and timely payments).
I hope I do not get BP crucified - it is just the way all attorneys who know what they are doing in Texas do them.
Stay safe out their
Alan
Post: What can I do with $140K cash?
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
I generally stay in the surrounding counties to get lower value properties. Right now, Austin is too high (re FMV) and still over priced a bit -- and a slower market.
Reach out if you want to learn how to do wraps and we can send much material for you to review.
Good luck with all!
Post: Any meetups in Central Texas/Austin
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Quote from @Fred Haas:
I am working in land development and would like to connect with others. Let me know if there are any established meetups.
Come out tonight for our RE Networking Meetup -- https://fb.me/e/zZV2huWUO
Post: Seeking Guidance on Transferring SFR to LLC in Texas
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Reach out and we can assist.
Alan
Post: Wraps and due on sale clause
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Quote from @James Hamling:
Quote from @T. Alan Ceshker:
Quote from @James Hamling:
Quote from @T. Alan Ceshker:
Quote from @James Hamling:
Quote from @Jay Hinrichs:
Quote from @T. Alan Ceshker:
Yes it does
First - get insurance in place correctly -- use a proven insurance provider -- this is most important
Educate seller to not contact the bank
Use a trust structure to have the conveyance appear to comply with Garn St Germain
Be ready to fix if needed via a deed flip flop or paying off the mortgage
These transactions should only be attempted by experienced and ready investors -- those with the knowledge and ability to fix if needed
Thanks
Alan
OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note.. and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.
OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed.
I had one that fit's this literally hours ago.
I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.
I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.
Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D.
Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.
Thus the wrap is quite popular in Texas.
Would it work in TX if a person placed into LLC, than sold the LLC? I won't run down rabbit hole of details on such but I am thinking the "asset island" method and the veil as to whom ownership in LLC is. Just a random thought.
I know it can, what I am seeing is often times people are asking on doing such and being told go ahead.
Seeing it more and more commonly with conventional purchase for purpose of SFR, post closing generally some months too yr or so into it asking if ok on it as they'd like anonymity from tenants, and being told ok.
In Texas, the members are known -- anonymity does not occur. Owner occupiers do not do this as they lose the homestead tax exemption we have here.
Lastly, there is little risk since the LLC can easily deed the property back to borrower if lender had an issue.
Post: Wraps and due on sale clause
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Quote from @James Hamling:
Quote from @Account Closed:
Quote from @James Hamling:
Quote from @John Clark:
Quote from @Don Konipol:
Per @t.
As most regular posters know, I’ve done many sub tos, wraps, etc. both on the buy side and the sell side, but mostly concerning commercial, not residential property.
Here are some of my thoughts….
1. If you have ethical concerns with this method of real estate transaction, then don’t partake in it. However, please understand that it is in NO WAY illegal, does not involve deception, or lies. This is because the mortgage document DOES NOT, in fact legally CAN NOT, prohibit a property transfer. It can just give the lien holder the right to accelerate the note. That’s ALL.
2. ALL my sub tos ended up all right. However, this isn’t to say there were not problems. Problems are handled two ways so that the “weaker” party to the transaction does not end up “holding the bag”. First, by having the best structure and procedures to avoid disaster. Such as third party loan servicers, vetting of buyers for credit standing/financial strength, insurance placement etc. Second by the purchasing party having financial reserves or borrowing capacity to handle acceleration of the note.
3. I don’t know the OP. But from the procedures his firm utilizes as per his post, it seems that he provides a reasonably well thought out and “best practices” framework to enhance the success of the subject to transactions he handles.
4. The OP is an attorney representing parties to a real estate transaction. He does not represent lenders and therefore owes no responsibility for their interests. Advising clients on properly structuring sub to transactions, is in no way unethical and does in no way deceive the lender. ( by the way, I am a lender!).
5. The irresponsible utilization of the sub to method of transferring real estate being promoted by a well known guru ( with past legal troubles) to naive, inexperienced, and under capitalized “investors” will lead to restrictive legislation negatively affecting the ability of responsible investors, desperate homeowners, and home buyers unable to qualify under high interest rates from doing a successful sub to transaction. I am not worried about my personal ability to do a sub to transaction in the future (though I rarely do them anymore) because any governmental action won’t affect commercial transactions.
Personally, I’m pleased to see that there are attorneys that have set up legal framework to provide sub to transactions have the best chance of success. I have no problem with the OP seeking to generate business; I would not have learned of his services otherwise.
That’s why so many of us took issue with the statement of educating the seller to not disclose to the bank.
yes Yes YES, EXACTLY!!!!
The judge ruled that by recording the deed, "constructive notice" has been given. The lender has easy access to that information. I think I will go with the judge on this one.
In fact, I believe the OP stated "They actually are looking at prior foreclosures that were reinstated." proves that lenders know they can do that very thing.
Lenders are not stupid. Don't treat them as though they are.
I would ask, “does a lender has a requirement to inform me that they are losing money and on shaky grounds?” or that “a real estate agent is considering giving up his license or is under investigation” before I spend the time and money tying to obtain their services? Seems fair based on your assertions.
I don't understand this hyperfocus on giving note holder notice, I don't think anyone has said there is a requirement to give notice.
What HAS been said, now for 4th time is the action of actively instructing to hide, obfuscate or otherwise intentionally mislead, is the action in point.
For example there are 2 forms of a lie; commission and omission. A person who argues they didn't lie about something because they simply never said anything about it is wrong, that's definitively a lie of omission. See it's the INTENT, not just accidentally or forgetfully not saying something, no, it's not saying something with intent to hide it, a lie of omission.
We are saying, the action of instructing, or conspiring, to actively take efforts be it via planned intent or active action, is the issue that by all law to the matter I have read is an act of fraud.
I know this got wordy but man-alive, 3 times said and still going sideways.
I'm not a Judge, nor a DA, nor a criminal attorney or any such attorney but I AM a Real Estate Broker, and what I understand of the law in the capacity as is required of my licensure, have experienced of it, and seen of it all, as well as read of it, the exact actions in discussion are way too close for my comfort in fitting the definitive.
And keep in mind, were in a world now where a former POTUS and very probable future POTUS, has been hit on similar charges, on when lenders were not upset, monies happily received, no non-performance issue, no victims what so ever......
So I am feeling that it's a new world where unless one can prove beyond a doubt with definitive documentation of one's legality, your gonna be guilty of anything charged now.
Hell, by the new standard, I'd be found guilty of being Sasquatch!
The googling you reference is regarding the inception of a mortgage.
Mortgage companies have attorneys. They know how to right clauses that require action. Re the DOS clause, they did not. They made it a permissive right for the lender. They could have made it a requirement same as getting insurance, making a payment, maintaining the property, etc.
They did not.
Anyone have ideas on making the wrap transaction safer and more secure? You know, the intent and exact statement in the original post.
We get it -- different people have different opinions on laws and ethics and such. But - putting this aside, assuming wraps are going to occur despite these opinions, how about the focus of the post. New threads and topics await all of you law and ethics folks elsewhere.
Post: Wraps and due on sale clause
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Quote from @James Hamling:
Quote from @T. Alan Ceshker:
Quote from @James Hamling:
Quote from @Jay Hinrichs:
Quote from @T. Alan Ceshker:
Yes it does
First - get insurance in place correctly -- use a proven insurance provider -- this is most important
Educate seller to not contact the bank
Use a trust structure to have the conveyance appear to comply with Garn St Germain
Be ready to fix if needed via a deed flip flop or paying off the mortgage
These transactions should only be attempted by experienced and ready investors -- those with the knowledge and ability to fix if needed
Thanks
Alan
OK other than paying off the mortgage everything else you describe is just trying to get away with something that you know gives the lender the option to call the note.. and deed flip flop is going to cause tax implications as someone who was raised i sub to and wrap my dad did them in the 70s and 80s and I have bought about 200 sub 2s but my play was just to fix flip and sell not to own long term this is where the risk comes especially those that wrap these to buyers that may or may not pay.
paying off mortgage is the ONLY sure fire way to make sure these dont end up in a mess.
OR.... And I know I am probably sounding like a broken record at this point but, it's true, OR via doing a Contract For Deed.
I had one that fit's this literally hours ago.
I am on listing side of things. Buyer wants to buy Sub2, communicate to seller, who turns out his mortg guy is a life long close friend so said he will only do what he says is a-ok.
I pressed buyer for whay Sub@, what is it he was looking to get at. Control of property, with only ___ down, and payments monthly of ___, for __ term. Ok, simple. I let buyer know, Sub2 isn't only way we can get that done.
Seller checked with finance friend who said C4D A-OK! No issue at all with doing it via C4D.
Sub2 brings some pretty BIG scarry risk potentials that I just don't understand taking that kind of risk exposure vs C4D.
Thus the wrap is quite popular in Texas.
Would it work in TX if a person placed into LLC, than sold the LLC? I won't run down rabbit hole of details on such but I am thinking the "asset island" method and the veil as to whom ownership in LLC is. Just a random thought.