Hi, folks. I’m in need of long-term lenders (not hard money) who don’t require title seasoning. I’m looking to wholesale properties to buyers who get mortgage loans and need to get them in with lenders who don’t require title seasoning since I don’t hold the properties for long before selling them. I need this for my short sale flips.
Does anyone have ideas on how to find these non-seasoning lenders for my buyers? TIA.
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Bob
There is really no way around the title seasoning issue for end buyers with Fannie/Freddie/FHA financing (90 days). A local bank may not require the seasoning if you have strong buyers. You may need to look at an owner finance strategy in this market.
Thank you for your response. Would this seasoning requirement also apply to conventional loans?
If a buyer wanted FHA for the lower down payment, my intent would be to buy the difference between the down payments with FHA and conventional if the conventional loan does not require seasoning (only if this is legal, of course).
To owner finance would be to defeat the purpose of my short sale/wholesale model. This is becoming an increasingly common model for wholesaling given the high number of properties in foreclosure with very little or no equity.
The idea is to use a transactional (24-hr to 72-hr lender) to purchase the property one day on a short sale, and then wholesale it the next day to my end buyer. I understand that the end buyer (my buyer) might have problems getting the mortgage company to lend on a same-day wholesale, which is why the day or so delay between closings.
The seasoning applies to conventional loans as well. FHA or Fannie/Freddie (conventional) financing for end buyers requires the seller of a property to be the owner of record, on title, for at least 90 days. If you haven’t closed any of these deals, this is the reason: you have no beneficial interest in the property. If you are working short sales, you may want to talk to an attorney about a double close whereby you exercise your option on the property in A-B transaction (with transactional money) and you sell the property to end buyer in the B-C transaction: even then, it is up to the buyers lender whether they will accept this or not.
For wholesaling model to be effective, you need all cash or hard money buyers.
Hmm. Thank you for your input on this. There is someone in my area who is doing this very short sale/wholesale model with transactional (24-hour) lenders and putting his buyers into mortgage loans through banks. I’m starting to think he is either getting the deed early and letting the title season while the lender makes up their mind about his short sale offer or he is just recording the Affidavit of Contract/Option to give him equitable interest and start seasoning with this.
You’re right, though. Time to ask my closing attorneys.
I am a short sale investor and I have not had any problem getting my end buyers in conventional loans even if I haven’t owned the property for more than 90 days, but I would recommend recording the deed when you start the short sale process. This way if the end buyer does get a FHA loan you will be more than likely be passed the 90 day mark.
Thank you for your reply. I see you have an affiliation with a transactional lender and I value your input on this.
In some states, like Florida, it is becoming dangerous to get the deed on houses in preforeclosure. For example, in Florida, if you get the deed on a house in preforeclosure, you automatically take on all liability for the mortgage loan whether you have your name on the mortgage or not (new law as of Oct. 1, 2008).
I just got back from a Ron LeGrand boot camp and Ron made the comment that it should be okay to just get a contract on the house and then immediately record the Affidavit of Contract. He said that recording this starts title seasoning so when the lender approves your short sale 90 or more days later, the title is seasoned enough to cash out the property and then wholesale it to an end buyer who has a mortgage lined up with a company that requires titile seasoning.
In the event that getting the deed is not a good idea, such as in Florida, does recording an Affidavit of Contract on the property start title seasoning like Ron said?
In Regards to the “recording the deed part” I record the deed the day get it… it cost me about $45.00 but i think its worth it to season the title…
I NEVER record the deed in my name its always in a “land trust”, ron legrand speaks about it to.
the trust owns the property, you own the trust, thus you have control, ownership, seasoning has started plus you are protected against any liability from the lender.
what does anyone else think… anyone else use and like land trusts??? :bobble
Thank you for your reply. Very valuable info I can use.
Ben Pargman, the Short Sale Service owner, was at the LeGrand boot camp. Although he is based in Atlanta and has none of the liabilities experienced by Florida investors with getting deeds on houses in preforeclosure, he said he no longer teaches getting the deed like he used to do so in the past. He and Ron not only said not to get deeds in Florida but also not to get them anywhere else in the US.
I don’t think getting deeds will be a problem in my target market (Aiken, SC/Augusta, GA and surrounding areas) yet, but there must be some serious liabilitites associated with it if even Ron, who in the past has told us to “get the deed or get the door”, is wary about getting deeds in preforeclosure situations.
That is the issue I have with most RE Guru bootcamps–most of them couldn’t even tell you if the strategies they teach are even legal in your home state.
I have done Multiple shortsales (In florida) and all of them I did a “Warranty deed to trustee into land trust” :deal the trust own’s the house, you own the trust…
I have done this many times to this day…
I have never had a problem… has anyone had problems doing this :shocked???
I think i have done this 40-50 times in 2008, hand full this month with out any bumps :bobble.
I would be very interested in hearing 1st hand experiances :deal…
Thanks fellow REI :biggrin :rolleyes!!!
As of October 1, 2008, Florida has a very strict foreclosure act that makes what you are doing a felony. At the real estate event I just got back from, an attorney spoke about this new Foreclosure Act. It is very dangerous for investors to get deeds on houses in preforeclosure in Florida now. Now, when you get a deed on a house in preforeclosure, you just inherited all the liabilities of the underlying loan even if your name is not on the mortgage loan. All it takes is one savvy homeowner to press charges against you and I think you’re in for some serious trouble.
Is the email in your name active or is it a spam filter? Send me an email and I’ll send you the statute as I scanned it from this attorney’s handout at the event. Or go to the link below my sig in this post and go to the Files section in the “NARHRI” folder and download the “Florida Foreclosure Act” as of October 1, 2008 if you prefer.
Yes that is my personal E-mail you can send it to me there.
I would be very interested in this…
I am not to worried about the liability, the deed is not in my name it is in my land trust, my name is not recorded on the trust.
do you use land trust’s at all???
Hi, Matthew. I just emailed it to you from my Yahoo email.
I have used land trusts and you are correct in that the Affidavit of Trust is not recorded. My only concern would be the seller could haul you into court and say you are the beneficiary, not him/her. I have a friend in PA who has tried to help sellers in foreclosure and twice they have made life very difficult by involving lawyers, etc., once the immediate pressure from their lenders was gone. These days, a judge in a court of law is more likely to believe a distressed seller than an investor trying to help him/her.