As an investment, I am going to finance a samll house for some long time friends. Never having done this before I am unsure how to approach it. It appears to me the title company will take care of everything and execute the deed of trust. Do I need any other protection beyong the Deed? Should I seek my own representation, or should the title company be sufficient?
Thanks in advance for any advice.
Sorry, meant to post in the LR.
I do alot of real estate clsoings. You are eseentially a lender, and as such want to be named on the “Title Insurance Policy” (actually two policies, the lenders policy andthe owners policy)as the lender, and the amount of your loan be the insured amount, in the event that there are any title issues in the future.
You should have mortgage (perhaps a “Deed of Trust” in your state) and a note to back it up, stating the specific terms of your investment. teh Mortgage should be recorded as a lien against the home.
The title company will not represent your interests, only an attorney would. As an attorney, I would always suggest hiring an attorney. The cost of preparing a Note and Mortgage are minimal.
pm me or email halflaw@comcast.net for more info or any questions.
mike
As an investment, I am going to finance a samll house for some long time friends.
That sounds like trouble. Make sure to keep us updated on the “I can’t believe I bought a house for these idiots!!!” thread.
Thanks Mike, I appreciate the advice.
KLinggi, I’ll be sure and keep you up to date. ** **
I’m a little vague on what you’re doing…whether you’re lending the money, securing the financing to lend them the money or just co-signing. However, I concur with the other post, get an attorney. Protect yourself. I practice in Massachusetts, where we don’t use title companies…attorneys are the title agents. However, In my limited experience in dealing w/out of state title companies, I’ve come to realize that you don’t have to have much upstairs to work for them (this does not apply to all…covering myself from backlash;)). And, to reiterate the other poster, they’re not looking out for your interests. This is a huge endeavor…protect yourself.
pat
Agree. I have seen friendships end several times over “deals” like this. E.g., “friend” is a contractor and builds home at “cost plus” for other friend. They go to court and don’t speak anymore. Generally a good idea to keep business, friends, and family separate, IMHO.
OK, I’ll give some history. I use the term friends a little loosely. Yes I would consider them friends. However the relationship originates from them working for me for 6 and 8 years respectively. They are both standup people and I have no problem whatsoever loaning them money. My role will be as the lender. Meaning I will provide the cash to purchase the home. They are certainly capable of obtaining their own financing, however this looks to be a sound investment for the 100K I am earning very little interest on currently. I knew of their intentions to buy, and approached them with this. Sure, there are always risks involved, and there is always a chance the relationship goes catastophic. But this is a business deal and if they don’t keep their obligation, I forclose and end up with a house. I don’t see the risk as being that great. I will do as suggested and obtain counsel to at least write a note to back up the Deed of Trust. While the Deed is probably suffecient, a little extra documentation can’t hurt.
I appreciate the advice and certainly realize friendship deals can go bad. I am however comfortable with the transaction. But like any business deal, I intend to protect my investment as much as possible. And for those of you who are curious, 100K will get you a new home in the midwest.
Thanks again
Well, I sincerely hope it works out.
But, if I had $100K to invest, and if my friends could get a loan on thier own recognizance, I’d take my money and put it into a good investment vehicle and tell my friends where the nearest mortgage lending firm was. But then, that’s just me.
Now if it was one of my sons and a daughter-in-law and I just wanted to help them get a house, I might think differently.
For a few hundred dollars, you can get a reasonably complicated attorney look at and sign off on this deal if it makes legal sense. If you are invested a fair bit of money, why wouldn’t that be worth it?
Different places use different terminology…but if your “Deed of Trust” is the mortgage, remember that a mortgage is the security instrument for promise to pay back the money. That “promise” is made in a note…which you will definitely want them to sign. If for some reason or another the property loses it’s value, you’ll want to be able to sue on the Note to recover. Also, foreclosing on a mortgage doesn’t mean that you “get” the property. The house gets sold at foreclosure sale and you get paid back. If there are other liens on the property that take priority over your mortgage, then you get paid back after they’re paid.
100k and you ask for advice on a msg board? Get thee to a lawyer competent for your jurisdiction pronto…
Get an attorney. You are getting what you pay for by asking for advice here.
Thanks patd. Thats good information.
Believe me when I say I m not making decisions based on message board advice. I guess you could call it a little learning session before I procure representation. My main concern was weather the title co. could or would represent my best interests or if outside counsel was necessary. My experience is the vast majority of Triathletes are successful in their respective professions. Asking here seemed an easy way to start. Thanks to advice from the few who answered, I won’t waste my time Q&A’ing the Title company to learn what I have learned here.
Thanks again for you help.
what state is the property in?
what state is the property in?
Missouri