Bought the house sub2 three weeks ago, been advertising to Lease-Option it, or to rent it. I made two $950 payments and paid owner $300 to walk. so I have $2200 in the deal. Mortgage balance is $98k, FMV as is around $140k. After a month of mktg, no solid L-O buyers have appeared, most only have a few thou. to put down. My for rent ads will yield a renter soon though, for $1200/mo (Pmt is $950 PITI).
Now a pre-qualified buyer is offering $120k cash. Sounds good, but title’s only been in my LLC name for one month. Is seasoning an issue only for FHA loans, or is any bank going to make it hard to try to sell to this guy? I don’t want to keep the house empty only to have the deal fail at my expense. I’m thinking maybe I should make him lease-option it WHILE he’s getting it financed, so he’s on the hook if the loan fails. Good idea?
this doesn’t make any sense. how can a buyer be pre-qualified with cash? Either they have cash or not. If they are paying with cash then there is no seasoning and if they have excellent credit seasoning shouldn’t be a problem.
By “cash buyer” I mean pre-qualified for mortgage and will pay with (the bank’s) cash, not someone who can write a check with no worries or someone I’ll be financing, sorry.
Is seasoning an issue only for FHA loans, or is any bank going to make it hard to try to sell to this guy?
There is a good chance seasoning will be an issue. There are lenders that don’t care, but you won’t know until your buyer’s lender starts the loan underwriting process. Your buyer may have to shop for a lender for whom seasoning won’t matter.
I don’t want to keep the house empty only to have the deal fail at my expense. I’m thinking maybe I should make him lease-option it WHILE he’s getting it financed, so he’s on the hook if the loan fails. Good idea?
You can’t MAKE your buyer do anything he does not want to do. If title seasoning becomes an issue you can always OFFER the buyer a lease option. However, a lease option does not obligate the buyer to purchase. If his financing fails, you will at least have the rental income and the forfeited option fee.
If the buyer is getting an FHA insured loan, there is no way around the “seasoning” issue. FHA regulations prohibit the funding of a purchase when the seller has not owned the property for at least 90 days, NO EXCEPTIONS.
his generally should not be a problem in a fix-and-flip situation, since it will likely take you 90 days by the time you acquire, rehab, and sell. But, if you are planning on buying the property and reselling it in a double-closing, the end-buyer CANNOT go with an FHA loan.
I’ve been advised to include my sub2 seller in the process and write a letter to the buyer’s mortgage company–still not sure it even IS FHA loan–explaining that seller contracted with my company to get his house sold in whatever way necessary–L-O, cash sale, Contract for Deed, etc.–since it lingered on market for over one year without a sale. Since there was no sale per se, and no formal record of a sale (just a deed transfer) we’re hoping that will work. I’m troubled that you say this prohibition is absolute, but I’ll report back on the results. Worse case is I’ll explain to buyer once his loan fails that this is the only way, and that he may well be able to refi for more than he owes six months from now.
I have other interested parties with down payments who want to Lease-Option the house, but was hoping to flip it quick in this slowing pre-winter market.