24d ago in General discussion
Overcoming the Hurdles
Novations saved the day!!
I was working on a retail deal where the seller bought the property a year ago on a handshake, remodeled the house, and paid the final payment in April.
We listed the property on the market and went under contract on an FHA loan in less than thirty days.
However, we discovered that the seller never recorded any deed for the property until he made his final payment in April. He is now in the process of deeding the property over to his name.
When the buyers went to put down earnest money, the title company put a stop to it because the property was not in the seller’s name. They said the deed had to be finalized before proceeding with the sale.
The lender then stated that because it’s an FHA loan, and due to the 90-day flip clause, they would not be able to fund the deal. Consequently, we could no longer proceed with the sale.
Enter the novation.
We decided to cancel the filing of the deed, leaving it in the previous owner's name, and create a novation agreement with the previous owner. The new owner, who invested about $150,000 in rehab into the property, will now be able to sell it FHA. The previous owner will receive what they were supposed to on paper, and the new owner will receive the difference after his rehab, allowing the FHA loan to proceed and the property to be sold.
This creative solution ensures both parties get what they deserve and the transaction can continue smoothly.
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Overcoming the Hurdles
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