Be a fly on the wall, you might hear the F word
Shaun McCloskey and Cory Boatright and friends over at FlippingHomes.com have released to the public a recent "private" (student's only?) con call in which they discuss how the short sale business model for investors is threatened by title insurers who either don't get it -- or don't want to get it. One regional manager of a national title company told Shaun to take his business elsewhere, because what he was doing -- the proverbial "double close" or "simo (simultaneous) close" -- was fraud! But is it?
What's wrong with a double-close?
Fascinating call. As a title insurance producer myself, I listened closely, trying to decide on which side of the fence I should stand. On one hand, if someone is so close to foreclosure that the lender is willing to sell the house short (for less than the amount owed), they should be happy to get it off their hands. The bank should be happy they don't have to go through the foreclosure process, then try to sell the house through normal channels, taking the risk it might sit. The homeowner should be happy they don't get the black smudge of a foreclosure in their credit history. So what's the problem?
The problem is that on the same day Shaun buys the house at a discount from a lender and homeowner who just want out of the deal, he turns around and sells the same house to someone else for significantly more money. The difference is his profit. Buy low, sell high--the American way, right? The potentially fraudulent part? That he does this with back to back closings. If the lender financing the end buyer is working off a different appraisal, for example...that could be trouble.
Caveat Emptor, wot?
Presumably the seller and the seller's lender aren't privy to the fact that in the next room are a buyer and a new lender ready to pony up a bunch more cash for the same piece of property. They might get a bit annoyed at that. And the end buyer writing a much bigger check for the same junker Shaun just bought, like five minues ago? If they knew what he just paid for it, they might storm out! But Shaun says, no, usually they are aware, but even it they're not, it's still not fraud...right?
Don't know yet, because they broke the call into two parts, and so far only part 1 is available. Watch for the second half soon...I hope! Listen to the call there, then come back here and tell me your thoughts.
I can tell you the title insurer's point of view. Tomorrow...
Shaun McCloskey and Cory Boatright and friends over at FlippingHomes.com have released to the public a recent "private" (student's only?) con call in which they discuss how the short sale business model for investors is threatened by title insurers who either don't get it -- or don't want to get it. One regional manager of a national title company told Shaun to take his business elsewhere, because what he was doing -- the proverbial "double close" or "simo (simultaneous) close" -- was fraud! But is it?
What's wrong with a double-close?
Fascinating call. As a title insurance producer myself, I listened closely, trying to decide on which side of the fence I should stand. On one hand, if someone is so close to foreclosure that the lender is willing to sell the house short (for less than the amount owed), they should be happy to get it off their hands. The bank should be happy they don't have to go through the foreclosure process, then try to sell the house through normal channels, taking the risk it might sit. The homeowner should be happy they don't get the black smudge of a foreclosure in their credit history. So what's the problem?
The problem is that on the same day Shaun buys the house at a discount from a lender and homeowner who just want out of the deal, he turns around and sells the same house to someone else for significantly more money. The difference is his profit. Buy low, sell high--the American way, right? The potentially fraudulent part? That he does this with back to back closings. If the lender financing the end buyer is working off a different appraisal, for example...that could be trouble.
Caveat Emptor, wot?
Presumably the seller and the seller's lender aren't privy to the fact that in the next room are a buyer and a new lender ready to pony up a bunch more cash for the same piece of property. They might get a bit annoyed at that. And the end buyer writing a much bigger check for the same junker Shaun just bought, like five minues ago? If they knew what he just paid for it, they might storm out! But Shaun says, no, usually they are aware, but even it they're not, it's still not fraud...right?
Don't know yet, because they broke the call into two parts, and so far only part 1 is available. Watch for the second half soon...I hope! Listen to the call there, then come back here and tell me your thoughts.
I can tell you the title insurer's point of view. Tomorrow...
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