anything weird about this that I should look for?

hairmetal4everFebruary 21, 2012

OK, so this is a weird one. A friend of mine and former coworker sent me a message on facebook about this to ask my advice, since she knows I used to do mortgages.

It was listed as a "for sale by owner" but is a foreclosure. I did some research in the county records and it turns out the "owner" is a building contractor, and he carried the mortgage himself (well, via his building company) for this buyer and has since foreclosed. I talked to the seller, and he told me that the house is 3 years old, and aside from some pet stains in the carpet, its in great condition. He told me that as long as he clears what was owed plus legal costs (385k) then he's happy (house is valued at ~$550k) since less the note, he already made his money at the original sale and would have to credit any "profit" over the loan balance back to the buyer anyway. Apparently, the buyers had no credit established in the US but had a chunk of cash, so he agreed to carry the mortgage if they put a large amount down. Well, we can see how that worked out, haha. In fact the original buyers have returned to whatever country they came from.

If she decided to purchse this home, what should she watch out for, esp. if she's not going to use a realtor?

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krissie55

She would need a good lawyer, maybe a real estate lawyer to make sure there are no loopholes or cracks to fall through. Best to have legal representation.

    Bookmark   February 21, 2012 at 3:33PM
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redcurls

Any chance this is one of those overseas scams? I know it USUALLY works in the reverse way, but........

Just sayin'.........

    Bookmark   February 22, 2012 at 1:32AM
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hairmetal4ever

Hmmm. Good question redcurls!

Although having an attorney should help make sure this isn't the case.

    Bookmark   February 22, 2012 at 9:34AM
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ncrealestateguy

OP wrote:

"He told me that as long as he clears what was owed plus legal costs (385k) then he's happy (house is valued at ~$550k) since less the note, he already made his money at the original sale and would have to credit any "profit" over the loan balance back to the buyer anyway."

Is this a state law? I have never heard of this. Otherwise, it seems like a straightforward foreclosure sale. I would jump all over it. Your closing attorney will do a title search before closing to determine if it is in his name legally.
The first rule of RE is to get the property in your control. You can't do that unless you get under contract.

    Bookmark   February 22, 2012 at 10:50AM
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Billl

Sounds like a scam to me. If the house is worth WAY more than the cost, why wouldn't the original owner just have sold it and avoided foreclosure? Nobody just walks away from $165,000.

    Bookmark   February 22, 2012 at 11:14AM
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marie_ndcal

I would just tell your friend that your are not up to current regulations and cannot give any advice. Then tell them you would suggest getting legal representation like the other posters suggested. Personally, I would not do it. I would not put any cash into something like you described.

    Bookmark   February 22, 2012 at 11:35AM
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hairmetal4ever

OK, well I got a bit more info - the original owner was an employee of the builder's, which is why the builder agreed to provide financing. The lot was owned by the builder himself, and he agreed to let his employee build a house at cost himself as long as he did all the work. I guess the "cash" involved was a very small amount (maybe $10k) that the builder got as a "down payment" preconstruction. So he built the house himself using the builder (his employer) as the contractor, and agreed to let him have it at cost plus $10,000 (wouldn't there be tax ramifications? I don't know)...so the plot thickens...

That said, as long as title is clear I'd presume that my friend is good to go.

    Bookmark   February 22, 2012 at 2:54PM
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berniek

"So he built the house himself using the builder (his employer) as the contractor, and agreed to let him have it at cost plus $10,000 (wouldn't there be tax ramifications? I don't know)...so the plot thickens..."

A builder here does that for his emplyees, they just pay a markup over cost. No tax problem. The builder just needs to make sure appraisers for his other houses know it's not a arm length transaction.

    Bookmark   February 22, 2012 at 5:00PM
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marie_ndcal

Make sure there are no leins on the property? Were permits pulled and signed off? Is all the materials on the property paid for? These are questions a lawyer specializing in RE and building should look into.

    Bookmark   February 22, 2012 at 5:46PM
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ncrealestateguy

All concerns addressed here on the forum are addressed by a closing attorney. A seller can not transfer title with leins attached. If the house got a Certificate of Occupancy after it was built, then permits were done. Again it sounds like a good deal.

    Bookmark   February 22, 2012 at 6:28PM
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