Eric,
The current fha seasoning requirements call for three months seasoning. Some banks will have there own “in house seasoning requirements” before they will fund(even FHA deals) such as 6- 12 months which is really where your problem stems from.
As Tim pointed out, Banks are now asking investors to justify the improvements done to the property with documentation and there are some even wanting to know what you have paid for the property before they will fund the buyer if your name has not been in the chain of title long enough to pass there sniff test. All this is supposedly in the name of cracking down on the misproperly labeled “illegal flipping scams”.
Lets define the real problem: “SEASONING ISSUES for the Lender and a possible Cap on our hard earned profit”
There are many Lenders out there who donot have seasoning requirements. YOU Must actively see them out and deal with them. Having a couple of good mortgage brokers on your Team is the key. Your mortgage broker should no which lenders they deal with, who will not have an issue with seasoning. You should try and guide all your buyers to your mortgage broker so you can maintain control of the deal at all times and minmize this problem. when you run the
another way to deal with this problem (dipending on your risk tolerance) would be to possibly Take tiltle to the property in a trust With the sellers last name in the title, file a mortgage for your profit to an entity you control and not record the deed right away. This way if there is a cap you must be paid off as a lein holder in full at close. When you sign the PSA the sellers name is the trustee for “The owner of record” when you order the pest report, inspection, apprasal etc… you order them as “The Owner of record”. It all Matches whats in the chain of title and you have not broken it (chain of title) by recording the deed. I have been told this works well from another investor (never done it Never had to) to solve the seasoning issue when your buying the property from a home owner. You might consider investigating this further with your title company or attorney and formulate your own opinion.
If you have bought the property from the bank (REO) and I would guide my buyers to my broker, so we could deal with getting the buyer qualified through banks that dont have seasoning issues, Deal with B-C credit if theres a credit problem and record a trust deed for my profit to ensure i get it all at close. I prefer to not have to take back a second if possible, but I would If I needed to unload a property fast. If they dont pay me I’m right back in the game.
With all the seasoning issues I have only ran into this problem a handful of times and thats when i did not control the situation. Maintain control always as much as possible. The best way i know to hadle a flip is to do a simo close and marry the buyer and seller together in the transaction. You just show up as Fee in the deal.
Lets Get creative, not give in to them. Theres more than one way to skin a cat within the rules. Im sure someone has a better more creative way, but I hope i have helped some and got your creative juices flowing.
Ps. Tim congrats on a great site. This is Mack from killeen. We went out and looked at some VA property with Joe furman together. Were you able
to get anything accomplished with him. I am up in the jefferson county area now (Beaumont) Maybe I’ll give you a call when I get Back down to killeen and we could get together.