I have a short sale that we’re trying to flip. The end buyer’s bank just came back to us and said that if the property was last bought for more than a 30% discount, then it’s considered a flip and they won’t approve the mortgage.
Even though we agreed to close 7 days prior to the second ‘flip’ closing, so this is not a double closing.
Anyone run into this problem? I think it’s pretty ridiculous! :banghead
How can the % of discount be considered a flip? It should be the amount of time between buying & selling. What if you weren’t flipping it? What if you wanted to rent it out? That sounds strange to me.
If you close on the property 7 days before your end buyer, then you’ll have only 7 days of title seasoning.
However, from your post, that doesn’t seem to be the lender’s problem, but rather, your gross profit.
What they are saying is that if you’re making more than 30% profit from your purchase, they won’t lend. In other words, you close on a house and buy $70K; you can’t sell to this end buyer for more than $100K.
Raj
Seasoning is timing issue, nothing more. I’ve made more than 30% numerous times, just not on a sale of a property I have held less than 90 days that is an FHA purchase.
Try another bank. They all have different requirements.
That may be a Fannie/Freddie requirement.
You’re not getting the whole story here. I’ll bet that bank lends every day to buyers who are buying a house at more than 30% over the previous purchase price…its just that its probably several years since the previous “30%” discount" sale. There MUST be some time limit or they would be lending very few mortgages.
Figure out a way to sell it at a 29% profit and recoup the balance of profit as some other kind of fee. Or, lease option the property to them for the seasoning period.
jmd_forest
Yes, you are flipping. And, yes you do have a title seasoning issue.
The lender is looking at your time on title and also looking at your 30% profit. They are seeing that you did not do any rehab to justify the higher sale price. Since your sale price is more than 10% greater than your purchase price, you don’t have enough title seasoning for the lender to approve your buyer’s loan.
These are the HUD rules that have been in effect since 2006. Is your buyer trying to use FHA insured financing or a HUD first time buyer loan?
Use seller financing.Option contract.