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Re: Taking a Deep Breath

Posted by Ann on August 25, 2003 at 6:48 PM

In Reply to: Don't rush too much. You need time to check and double check. posted by Ward-CA- on August 24, 2003 at 11:10 PM

: Ann,

: Go to our Fillable Forms link and find the Projected Net Worksheet and fill it out to find the projected net equity figure after ALL deductions. (Your initial info above isn’t detailed enough to determine that figure.)

: When you arrive at that net figure, split it 50/50 in your mind. If you got 50% and the owner got 50%, how much would that be apiece? Does that seem like a fair deal for both you and the owner? Is it what you’d want if your roles were reversed?

: #1. Try to structure your deals where you give the seller part cash up front and the remainder to them upon your refinance or resale of the property. That way you’re giving the owners enough cash to get relocated to start over, with the balance owed them paid in full in a few short months. That will allow you to conserve the amount of upfront cash you need to work the business.

: #2. If you’re in CA you have to conform to the dictates of CC §1695 (see our Foreclosure Codes page) that requires you to wait 5 days after writing up your EPA (equity purchase agreement) before you can give or receive anything of value from or to the selling homeowner.

: When the 5 day waiting period is over, and the seller still wants to do the deal, that’s when they can exchange a deed for cash, etc.

: There’s no law prohibiting you from receiving title to real property while it is in default. The existing lien holders have the right to call their loans due and payable because of the transfer of title from their borrower to you, once they discover said transfer. But in this hyper seller’s market you’ll probably be paying them off rather quickly—within 4 months I’d guess.

: #3. You might find things working smoother with the seller if you give them about $2,000 to $3,000 upon getting the deed to the property and another $2,000 to $3,000 when they have moved out 5 to 7 days later. Then, whatever else you might owe them, should be secured by a promissory note and recorded deed of trust from you, payable when you refinance or resell the property.

: I caution you not to do a lopsided deal in CA where you’re making a lot more out of the deal than the defaulting homeowner. You don’t want the issue of unconscionable profit-taking to be alleged later on.

: Hope this helps.

Ward,

Thanks for you reply.

#1 Can't help wondering, though...when you caution against doing a lopsided deal. This deal we're looking at does look lopsided, but it's mainly because the sellers indicated that they only wanted to save their credit and stop the foreclosure. They mentioned that all they really needed was $5,000. We ended up bumping that figure to $7,000. Interestingly enough ,the sellers also stated that they hoped that in our helping them, we could get the remaining equity in the home.

#2 Also, when we get the owner to deed the property to us, should we then go ahead and record it with the county? Can we take title in our LLC?

#3 Do we need the following and when should they be completed?:
Title search
Title insurance
Appraisal
Termite inspection


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