Thread Options
#2187397 - 07/30/18 09:14 PM Investment Property Sell on Contract
ahkcompliance Offline
Diamond Poster
Joined: Sep 2008
Posts: 2,470
Midwest
We have a bit of an unusual situation. We are doing a loan for a client for an investment property. The client is then selling the house on contract to another buyer. The property is in a flood zone. Our client is wanting to have his buyer purchase the flood insurance. I believe this will be ok as long as there is sufficient coverage in place and the bank is listed as lien holder. Does it matter if the insurance is in our borrowers name? If for any reason there would be a lapse, we will force place against our borrower.

Return to Top
Flood Compliance
#2187405 - 07/30/18 09:49 PM Re: Investment Property Sell on Contract ahkcompliance
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,352
Galveston, TX
Who is going to remain the titled owner of the property during this transaction? You cannot insure something you do not own. When you say contract - you mean a land contract or an actual sale. Most banks don't get involved in this sort of transaction due to the complexities. In some State a person even with a land contact retains some rights in the property after a specific period of time of making payments. SO, your borrower quits paying and you have a property in which the title is clouded. You really need your legal counsel to bless the transaction and then figure out the compliance aspects.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2187425 - 07/31/18 01:59 PM Re: Investment Property Sell on Contract ahkcompliance
ahkcompliance Offline
Diamond Poster
Joined: Sep 2008
Posts: 2,470
Midwest
Its a land contract.

My wife & I have personally sold a house through land contract. In our state, the contract buyer does have some rights. Our home is not in a flood zone but our contract calls for the buyer to obtain homeowners insurance. In our case, our buyer purchases the homeowners insurance and lists both our LLC and the bank as lien holders.

Return to Top
#2187430 - 07/31/18 02:26 PM Re: Investment Property Sell on Contract ahkcompliance
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,352
Galveston, TX
If you take only the land contract for collateral and not an assignment of the underlying property, then you don't have a security interest in the underlying land. Then you would not be required to have flood insurance. But again, like I said, few banks get involved in these transactions with a land contract as collateral due to the complexities.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top