We used to call it “mattress money”. Money not in banks and not accounted for in usual ways, used to fund home purchases, usually by ethnic groups not likely to trust banks or safety deposit boxes.
Now Richard Branson of Virgin Air fame has tried to legitimize this practice with his new company Virgin Money.
Their website offers “real estate loans” but is really only a servicing company for borrowers who have already arranged to borrow money from friends or relatives. Virgin Money makes their dough by servicing the loans.
“Full Closing with Escrow” includes escrow services in addition to a full closing. They formalize the loan, ensures that taxes and insurance are kept current, and transfers ownership to the buyer with an official closing in a flat fee of $2299 + $19 a month for each month one has the loan. Apparently, you go to them with the amount borrowed, the interest rate you’re paying and other terms of the loan already negotiated and they just handle the paperwork.
As you know, transactions between family and friends are increasingly being structured as private mortgages. In these situations, friends, family and home sellers act as a bank and finance part, or all, of the purchase.
Virgin Money provides proper loan documentation and professional repayment management that protects the emotional and financial interests of all parties involved, while still keeping wealth in the family. And, we handle the fun stuff like accounting, year-end reporting, and tracking down late or missing payments. Well, we think itâ€™s fun.
In our MLS Purchase and Sale Agreements, we have a clause where the Buyer certifies that they are not relying on any contingent source of funds. When making one’s offer contingent upon a home loan, it’s usually not contingent on one from Aunt Sarah, but from a recognized commercial lender. Exactly how does one prove one is getting this loan? I suppose if they fund this private loan ahead of time and show proof of actual funds, that might fly. But I don’t want to be the first agent to try this….
And Virgin is a huge well-funded company, why would they dabble with these small potatoes? They’d have to have 100′s of new clients a month to compensate them for the trouble and liability.