‘A Tale of 2 States’:What It Takes to Get a Non Recourse Loan Done Sometimes! No comments yet
Our client is a businessman and an investor who lives in Massachusetts. He wanted to buy an investment property rental in Florida. That seems reasonable enough…doesn’t it? OK, so he goes shopping with a realtor in Kissimmee, FL and finds a property he wants to buy with his IRA. Of course, he needs a non-recourse loan if he wants to leverage his money and not pay all cash. Once he found the property, Lending Resources sent a written profile of it to the bank for a pre-approval and got the ‘green light’ to move forward.
In his case, the investor had established an LLC to hold the IRA that would own the property. We obtained the necessary LLC paperwork along with numerous other papers required and pursued our course of action to obtain the loan. About 1 month into the process, we discovered that the name of the LLC, while approved by the state of Massachusetts, where the investor lived, was not valid in Florida, where the property existed. That LLC name was already being used by another entity in Florida. This created several issues and resulted in a time extension of at least an additional month.
The investor and his LLC Manager now had to scurry to change the name on his asset statement with his custodian, Equity Trust; had to change the name on his agreement with Equity Trust; had to open a new bank account at Bank of America which was the original holder of his IRA funds to show where the funds originated from under the correct LLC name; had to change the LLC name on the loan application with the lender; and had to change the name on the purchase contract and get all parties to re-sign. In addition, we had to obtain Certificates of Good Standing for the LLC from both Massachusetts and Florida. This was on top of all the usual requirements of getting the appraisal, title report, property survey (now being required by the bank), etc. Needless to say, this LLC name change plus obtaining the Certificates of Good Standing from both states set us back a good month or more.
Nevertheless, the investor and his LLC Manager didn’t lose their cool. They went about working closely with Lending Resources to meet all the loan requirements and we closed the loan successfully with the title company’s diligent assistance. The sellers were in Europe, the buyer was in Massachusetts, the LLC Manager was in New Hampshire, the subject property is in Florida (as stated), the custodian is in Ohio, and yet, the title company was able to coordinate all signatures and obtain all paperwork back to the bank within 3-4 business days in order for the loan to be funded and closed. Halleluyah!!