Dallas-Fort Worth Real Estate Investor Club

Helping family members

  • 17 Nov 2013 10:34 PM
    Quote
    Message # 1440482
    Michael Mixon
    A member of my family is facing medical issue which may force them to retire.  They have no nest egg, but a pretty decent retirement plan.  Unfortunately this plan will not cover their current life style.  They believe they may soon be forced to decide between a foreclosure and a short-sale.  

    My question is would there be any legal or ethics issues involving me either wholesaling or bird-dogging this short sale?  Even if it's both legal, and generally accepted as ethical, would there be anything I need to know to protect both myself and my family member?

    Thanks,
    Mike.
  • 19 Nov 2013 4:07 AM
    Quote
    Reply # 1441408 on 1440482
    Deleted user
    Michael,

    Depending a) on how close a blood-relative you are to your family member(s), and b) who holds the paperwork (what bank and what that paperwork states) there may/may not be prohibitions against you helping your family do a short sale.

    As for protecting yourself, I suggest you contact a CPA and attorney who both specialize in investment Real Estate and find out what steps you need to take (generally and specifically) to protect yourself from investment activity related liabilities.

    That, and don't practice Law, Accounting, Medicine or Real Estate (etc.) without a license.

    -Greg

    Greg Wilson
    The REI Mentor
  • 19 Nov 2013 9:05 PM
    Quote
    Reply # 1441959 on 1440482
    Deleted user

    Mike,

    Why let it get to that point?  They need to be proactive and avoid the short-sale/foreclosure.  Why not rent the house out?  They can downsize and create extra income for retirement.  I have to many clients that wait until the last minute and they have no other choice but short-sale/foreclosure.  If this is what they intend to do make sure their lender will not file a deficiency judgement against them. 

    As far as you helping them out- details, details, details.  Make sure it is in the contract that you are related.  I do not think the bank will care either way.

     
  • 19 Nov 2013 10:33 PM
    Quote
    Reply # 1441988 on 1440482
    Michael Mixon
    I've considered advising them to rent, but I believe the house is unrentable.  It's 2800 square feet, 5 bed 4 bath, which greatly limits the number of people looking to rent such a home.  Also, it needs a fair amount of cosmetic rehab.  Mostly paint, some drywall patching and texturing, and a really good cleaning.

    Maybe with a few thousand in repairs it could become rent ready, but then we face the fact that very few renters are looking for a house this size.  To be honest, I was hoping to wholesale to someone who'd like to do a quick rehab, subject to short sale acceptance by the bank of course.  If anyone is interested I'll dig in deeper for details, if anyone would be interested in renting the property I already know the owner would be interested in a sub2, but I don't know the details on the loan, or a rent comp on the property.
  • 22 Nov 2013 4:32 PM
    Quote
    Reply # 1444372 on 1440482
    Deleted user
    If renting it out is not an option, they could do a loan assumption with another investor or someone who can fix it and sell it. Depending on the equity on the house, any investor could easily take over their loan on their behalf and settle the loan balance directly with them. If it's done right, they shouldn't have any problem getting some of their equity out of the house and find another place to live. 
  • 23 Nov 2013 12:49 AM
    Quote
    Reply # 1444532 on 1440482
    Michael Mixon
    I was under the understanding that most loans these days are non-assumable.  I'll double check on this loan, and see where that leads me.  Thanks for the suggestion.
  • 24 Nov 2013 7:15 AM
    Quote
    Reply # 1444988 on 1440482
    Deleted user
    Many times loans ARE assumable, the person assuming the loan just has to qualify. It's the NON-qualifying assumable loans that are like unicorns.

    -Greg

    Greg Wilson
    The REI Mentor
Powered by Wild Apricot Membership Software