If I buy a property and then resell it in a couple of months, or even a month if I get lucky, will my buyer have trouble getting a loan to purchase if I haven’t been on title for very long?
I’ve also heard of purchasing in my name and then assigning to a land trust. Then if I sell in a month or so, would my buyer have trouble with financing if I’m not on title very long?
I was considering getting my mom to be my trustee, but I don’t want to have to drag her out every time I write a contract. How do other investors get around that? i.e. my reason for question 2.
If the buyer is financing through HUD or FNMA or any other gov’t agency, the title must be seasoned a minimum of 90 days. Anything under 6 months and you can expect to be asked to provide proof of renovations you did to the property to justify any increase over what you paid for the property. Even then HUD may not approve.
Private lenders are usually a little more relaxed.
These rules were put into place to stem the tide of fraudulent remarketing at inflated values and other scams. One bad apple…
[i] I was considering getting my mom to be my trustee, but I don't want to have to drag her out every time I write a contract. How do other investors get around that? [/i]
That would be a terrible mistake for a number of reasons. Your mom would not be recognized by the courts as a standard trustee who charges fees in accordance with industry standards. Her death would embroil the trust in probate, bankruptcy, etc. Your mom would very likely not be bonded which would not support the trust’s validity in court. Her likely bias would impair the trust’s integrity.
The selection of your Trustee is of primary importance and should not be taken lightly.
The simple way to handle this is to place your property into the Trust, select a professional trustee, make your potential buyer a co-beneficiary of the Trust, then direct your Trustee to sell to your buyer. The length of time YOU own the property should not affect your Buyer’s right to purchase. Good luck.
It’s not a question of right to purchase, it’s a question of HUD rules regarding quick sales, which is one indicator that they look to as signs of potential fraud.
Seasoning would still be an issue for buyer’s financing.
I agree with Mark. The secondary market, where many residential loans end up, have seasoning requirements. Lenders who hold loans in-house have more flexibility when dealing with seasoning