Skywalker:
If you are buying it ‘subject to’, then you can use a Land Trust as mentioned above. If you are not experienced with this, then do as mentioned above. Take before and after pictures and make sure when you sell it, the loan is submitted to a conventional lender that does not have strict ‘seasoning’ requirements.
Follow the instructions I gave above.
Best Riches,
Jeff Adam
Thanks jeff for the info. Sorry to ask but what are seasoning requirments…
Most lenders will require you to own the house for 6-12 month’s before you can ‘flip’ it… This is because the loan industry did a survey and found out a high percentage of loans that went into foreclosure came from houses that were ‘flipped’. They now have strict requirements to help curtail this.
They key to have lenders that you work with that don’t have such strict requirements. Also, before and after pictures help, receipts as well as a letter to the lender stating that you purchased the house on a distress sale and a documentation of the rehab you did.
Best Regards Luck Skywalker!
Jeff Adam
jeff let me ask you this. If most of your properties you acquire you do not buy them yourself, but you sell them to someone else before you actually close .why do you worry about seasoning. Since you are not applying for the loan but someone else is??
Skywalker:
I buy everything I can get my hands on and:
-Retail to end-users
-Wholesale to other investors
-Rent for long-term appreciation
So to answer you question, I have to worry about ‘seasoning’ issues as I retail a lot of houses. What you want to do is learn how to ‘wholesale’ so that you can keep buying and just ‘flip’ to other investors when you are at capacity with retail deals or a property is in a ‘war-zone’ and you don’t want to deal with it.
When I first started out, I would buy a house or two, fix them up and then 6 month’s later when I learned how to ‘wholesale’ my business took off. I was now able to buy and sell everything that came my way. I recommend you take a course on ‘wholesaling’. Ron Legrand has a good one. You can but it on E-bay.
Best Regards,
Jeff Adam
So let me see if I understand this correctly… If I am buying a fixer-upper and taking the title in my name upon closing, then spending about 2 months + a few thousand dollars to make the place nice, I can’t sell it because no buyer can overcome the seasoning issues with a lender??? That sounds awful… how do other people in fixer-uper business do it? Does this apply in FL, GA, TN - anyone know?
Also, If the only way around it is doing land contracts, would the title company that I use when buying be familiar with this “land contract / trust” …or do I have to buy some course to understand it.
Jason:
It is really simple. You have to make sure whoever is doing the loan for the person you are selling the property to does not have an issue with ‘seasoning’. Re-read my post above…
In terms of the using the Land Trust, if you have never done one before, I recommend you use an attorney or escrow person who is familiar with using Land Trust or take a course… Bill Gatten has a good one.
Best Regards,
Jeff Adam
You have all lost me with all these suggestions. It seems as if he’s asking how his investor can purchase this home and profit.
Yet you are all correct.
I work most of my deals with investors and I use about 200 different lenders. Yes I am an investor/mortgage broker. When I have a foreclosure brought to my attention I let one of my investors know about it. We have our appraiser do a value check. If it is worth 50 to 100% more than what is owed, My investor jumps on it. I find one of my many NON-conforming conventional lenders with 100% LTV. I then put my investor through this lender for pre-qualification. I call the lender holding the note of foreclosure for an actual payoff.
In some cases I’ll negotiate a short sale. (Be careful with SS, the lender could go after the seller for the difference through a default judgement).
My investor gets a purchase agreement from the home owner as long as they are with-in their redemption period. We submit the deal. This is legal and profitable for the investor. Now if he has no plans to occupy the property then we go for 90% LTV as non-owner occupied. Most of my lenders will allow an investor to go 90% up to 5 homes not including his principal residance. So lets do the math.
100,000.00 FMV
90% LTV
= 90,000.00 new loan in the investors name.
90,000.00
-50,000.00 payoff
-5800 closing cost
= 34,200 to investor
On these deals I only use lenders with out the seasoning guidlines.
Just make sure you are completely honest with the lenders about occupancy and you know the law. Most title companies will only cut the proceed from equity to the seller. (you have to careful here) If you are doing a short sale, the seller can not profit.
Keep in mind this is the quick version, the’re may be more issues and qualifications at play here.
Fiat:
The term ‘seasoning’ refers to the amount of time the individual owns the property. There are a lot of conventional lenders that want you to own the property for 6-12 month’s. It has nothing to do with buying a house from somebody in pre-foreclosure. When purchasing a property in pre-foreclosure, you can go to a lender and get a loan and put 10% down and pay $5800.00 in closing costs and pull out some big money. This strategy would work great for somebody who needed some fast cash and was just starting out. There are a lot of downfalls to this however. If you look at your numbers, if you were to sell this property with a real-estate agent paying a normal commission, you would have to come up with money our of your pocket! Run the numbers. 6% for real-estate fees and 3-4% for title,escrow, etc…However, as a creative real-estate investor, it is much easier to just assume the existing financing ‘subject to’ so that you don’t have to pay the $5800.00 in closing costs. When you go to re-sell the property, your profit margin’s are higher. John “Cash” Locke’s course is an excellent resource to learn how to accomplish this.
The smartest thing for an investor to do is line up their own private financing and pay 10% - 12% interest with no points or fees. 10% interest with monthly payments and 12% interest “Fee Simple” meaning you don’t make any payments until the house sells. Imagine being able to do deals and not make any mortage payments until the house sells! There is a great
resource on the internet that will assist investors in accomplishing this.
Visit www.privatelendingmadeeasy.com
Best Regards,
Jeff Adam
Jeff
Read my post again, I never indicated I did not know what seasoning was. It is very obvious. Whether your speaking of term or account seasoning it’s all the same. There are also a lot of conventional lenders without seasoning guidlines. I have investors seek me out for such lenders all the time. In my post I refered to using lenders with out seasoning because my investors and myself will flip these units fairly quickly, therefore making money on the back and on the front. If I misunderstood what the original post was trying to say then beg my pardon. The stratagy u speak of, I have used many times before, but don’t mislead about the get rich quick courses that are out there, you know the saying buyer beware. You can pick up on the right people and forums such as this and with a little research you really don’t need to spend 100’s to 1000’s for some course.
It sounds like your making a pretty good living with your investment course, so carry on and good luck to you. If you want to trade techniques in the future I’m always willing to increase my bottom line. And again I apologize for my misunderstanding of the original question.
Thanks for the constructive critique I appreciate it.
No worrries Fiat. You might want to consider the Ezine Sponsorship that is offerred on this site. That way you can show everybody the program that you are offerring. I think it may benefit some folks!
Best Riches,
Jeff Adam