Does anyone know if it’s only for primary residence sellers or can flippers (investors) take advantage of this rule. I just negotiated a short sale on house and and am flipping it to an “end-buyer” for a profit but have only been on title for one month… how do i get around this rule???
Sell to a cash or hard money buyer, or find a lender that doesn’t have title seasoning requirements.
Steph
Great answer. I’m going to attempt to have the homeowner of the property sell his redemption rights for a fee. I think it’d be the easiest way and the most profitable. Maybe I’ll have the homeowner assign me his redemption rights and then at that point i can sell them to the new buyer for the difference. I can get it from the bank for 85,500 and I just got the offer for 109,900. What a spread 
I can have the H/O assign his rights of redemption then i can re-assign them to the new end-buyer for the difference… Hmmm i do have an investor that can cash it out from the lender the we would split that difference but i can successfully do it this way i don’t have to use his money. Tell me ur thoughts !
Sounds like a nice spread, that’s for sure. :beer
The rest of it is stuff I have zero experience with, so hopefully someone else can chime in and give their input.
Good luck with the deal…
Steph :cool
Since there was no foreclosure, there is no right of redemption to purchase, right?
HUD has had a 90 day rule in effect for several years now that applies to FHA loans. If a buyer is using an FHA loan, the HUD rule requires the seller to be on title at least 90 days prior to the date the contract of sale is signed. Applies to all property sellers, wether selling primary residence or not. The 90 day title seasoning requirement can be waived if the seller is selling for no profit or even selling at a loss.
Not sure what “extension” to the 90-day rule you are talking about. Perhaps you are referring to the recent legislation that only applies to the resale and marketing companies that sell REO property as agents of the foreclosing lender, and which take title to the property to facilitate the sale. For these marketing and sale agents, the title seasoning rule is waived.
HERE IS THE FHA Flipping Rule in detail
FHA requires that any sale of properties that will be financed using FHA insured mortgages must:
- Any resale of a property moy not occur 90 or fewer days from the last sae to be elibable for FHA financing and
for sales between 91-180 where the new sales price exceeds the previous sale price by 100% or more require additional documents validating the properties value.
To be eligible for FHA financing the property must be purchased from the owner of record and may not involve assignment of sales contract.
- Sales occuring between 90-180 days following acquisition by the seler the lender is required to obtain a scond appriasal made by another appriaser if the resale price is 100% or more over the price paid by the seer when the property was acquired.
- Resales between 91 days and 12 months, If the resale date is more than 90 days and byt before the end of 12 month following the date of acquisition by the seller but before the end of 12 month foling dte of acqusisition. FHA reserves the right to required additional documentation from the lender to support the resale value if the resale price is 5% or greater than the lowerst sales price of the property during the proceeding 12 months. At FHAs discression such documentation may included another appriaser.
Still say put the darn thing in a trust at contract
What is buying the home in trust going to do?
The issue is the title companies that underwrite insurance do not provide title insurance for buyers doing simultaous Flips, and if they do they get their underwriters CAN THEM. :flush
youre using the wrong title company
You’re not “buying the home in a trust”. That’s the first misunderstanding. Once you figure that part out, it will make the whole thing a lot easier to understand.
Let’s use an example of an LLC, instead of a Trust. Let’s say the LLC is created with one share of stock, and the sole stockholder hires a manager. Is it mandatory that this hired manager own any stock? No.
Is it mandatory that there be more than one member, and more than one share of stock. No.
That’s basically what you have with a Title Holding Land Trust – you have a manager (a Trustee) and you have a Beneficiary – the Trustor, who holds the “stock” in the Trust, i.e. the Trust assets as personal property – and you fund the Trust with a worthless asset, a house in which there is no equity. The Trust holds the title but the Trustors hold the beneficial interest.
Now if the Trust decides to sell the property 91 days after taking title, the seasoning concerns will have already been met. The A-B transaction took place 91 days ago, and the second buyer, C, will be purchasing from the Trust, not the previous title holder.
I’m not an attorney, but that’s the advantage of transferring title into the Trust. An LLC could probably serve a similar purpose, but then you have the problems of loss of privacy because the LLC must be recorded with the Sec’y of State. With a Trust, only the deed needs to be recorded. It’s a much cleaner way of taking title, IMO.
If the trust is holding the property 91 days before reselling to satisfy the 90 day rule, you don’t really need the trust, right?
Dave T. If you’re still interested, ask your question again. I’m not following.
If the trust is holding the property 91 days before selling, why do you need the trust? After a 91 day holding period, what title seasoning issue do you have that won’t be resolved unless you use a trust?
Since your end buyer is getting financing with FHA it would not matter if you are using a Land Trust or not.
I agree with tampasteph, if you can find a lender that does not have title seasoning issues… this would be a better way to go…
An option you might want to consider is doing a lease option… so lease for the next two to three months and then have an option agreement to buy… this will get them paying the bill so that you do not have to incur the additional expense.
Just remember to have them put down a nice option amount so that you do not get screwed if they decide to walk away before purchase.
Gary