I have a property that I purchased this month for $27,750 from a bank. The house appraised for $60,000. I have a total of about $31,000 tied up with this house. I have a buyer who agreed on a $53,000 price and the mortage broker told me that he may not be able to get a loan on this house because I have not owned it long enough to show a $22,000 pofit. The broker told me that this is “flipping”. How is the an illegal flip when I purchased this house undervauled and sold it undervauled? Thanks for your response.
I’ve run into this issue as well. It is insane. Basically the banks say that because the house sold recently for so much less than it is now selling for it is not realistic. I know they are trying to protect their risk, but all they need to is a little due diligence, get a new appraisal, havean agent run some comps and it should be OK. But many banks just won’t do it because they think it is too risky. You may have to carry a contract for 6-12 months before your buyer can refi and buy you out.
The agent is correct. There is a relatively new law that makes it illegal for banks to fund “flipping”. It defines flipping as the quick resale of a house without substantial improvement of the house for a grossly inflated price (my terms not theirs). This presents a problem, but it is not insurmountable. You could lease/option the property for a year and then let the buyer get a loan. You could do a wrap and let the buyer pay you and you pay your mortgage company. You could do a Sub-2 with you holding a second that you could sell at closing (or not as the case might be). There are lots of options as to how to make this deal work. It just takes a little bit more creativity to do it.
They CAN get financed even if you have owned it very briefly!
The buyer needs to use a conventional loan and you should be fine. There is a 90 day rule on the books now for all FHA/VA loans, but it doesn’t apply to conventional lenders (yet anyway).
I sell to retail buyers within 90 days all the time - you just have to be aware of the lenders’ rules. Call a few mortgage brokers and see what they have to say about it. I will refer interested buyers to a mortgage broker I know can close the deal. Talk about win-win!