Flipping/Seasoning Roadblock Help

Hello All,
I do some flipping in the Chicagoland area and on my current project I have ran into a few issues…The property is a
2 unit brick building with a basement apartment onla S.Side of Chicago
1st Floor 2bd 1 bath
2nd Floor 5bd 2bath duplexed up to the attic
basement 1bd 1 bth only 1 entrance so not legal
I purchased the place for 146k in mid April and then got a construction loan for 65k to rehab it…I came out of pocket with another 20k due to problems in the basement, and some electrical and plumbing issues…
So as of now I am in for 231k
The place is huge and immaculate…70 new windows, 2 new furnaces w/ca…Ceramic in the kitchens and baths, new plumbing an electrical…

I got a contract for 270k and I was giving the seller the max of 2% of purchase price toward closing costs…He was going owner occupied, stated with a 640 credit score and things were going good… then the lender hit him with about 10 stips needed before closing…He met all of the stips but the last one was appraisal review…The original appraisal came back @ 270k…The appraiser said he needed to go about 10 blocks on 2 of the comps b/c there were no recent complete gut rehabs but all seemed ok…Appraisal review came back today and told the buyer the most they could do was 215k…

That wont even cover my original purchase price and original rehab…his lender told him it was the banks way of telling him to beat it, b/c they didn’t want to do the deal due to the seasoning and the price increase over what I paid for it…

Any suggesstions? Am I screwed on selling it and should I plan on renting it out Sec8? Or since I need cash, would a cash out refi make sense…My current rate is around 9 and my current balance is 181k.

This is my first post so any help is appreciated…Thanks

What type of lender was this individual taking the loan through?

b/c paper lender out of Schaumburg IL. Thanks

This started happening about 6 months ago…longer on FHA’s, when the industry realized that if they ignored the seasoning requirements, they wouldn’t be able to sell the loan and they were putting themselves at risk for the type of loan with the highest default rate in the country…FLIPS. A flip is bad because it’s usually a quick re-sale at an inflated value. Unfortunately, re-habs get lumped in with the flips unless you properly document the file to show otherwise, and have an underwriter that has the ability to approve it. I would try to find a lender that can get around this problem and refer your buyer to that lender. Most of our investors won’t take a contract where they don’t have control over who does the mortgage because they know that it’ll just end the way yours did, and they’ll have to start all over again. Good Luck! Sandra