We found a pretty good deal in Texas. Its our first deal so I need a little creative help from the pros. We’re getting the property to wholesale. The bank countered back wanting to remove the ‘and/or assigns’ clause out. We were told that we couldn’t do a double close because it was considered flipping (which is illegal). The realtor’s legal team said we would have to keep the property for at least 90 days.
We don’t want to keep it that long because that begins to eat into our wholesaling profit.
We also asked about buying the property with our LLC and then assigning or saling the entire LLC to our buyer. They said that would also be considered flipping.
I am negotiating for my first “flip” in DFW as well. I was told by my agent yesterday that I would need to hold the property for 90 days. She did say that I could start to market it whenever I was ready, and could sell it at any time; I just could not close before the 90 day period.
She also said there were probably lenders who would do it; just not the ones she uses the most. I am doing a combination of flipping and holding. I do not believe the flipping in less than 90 days is illegal–just some lenders who don’t want to do it. If you find out who will lend like that, let me know.
Good luck, maybe I will see you at the DFWREI, Betty
Perhaps Ted and Mike would like to jump in here, but flipping is NOT illegal.
Going in “cahoots” with an inspector, appraiser, RE agent and such for the sole purpose of over-inflating the value of a house to flip is mortgage fraud, which IS illegal. Lenders just don’t want to take the chance any more so they enforce these “seasoning” requirements before they loan your buyer the money to buy your property.
This is why you need to have a good buyer’s list, preferably buyers who don’t NEED to use conventional lenders to buy houses. Private investors and rehabbers who either use their own money or hard money are examples of buyers who don’t need the services of a big lender.
Have you checked your local small-town bank? These guys are usually a little more motivated to get other people’s money in their banks and they are more flexible than the big lenders. If you first go to this type of bank and ask them, “I’m an investor and I sell houses quickly after I purchase them. Would you be interested in providing competitive rates and overlooking seasoning requirements if I brought buyers to your doorstep?” Hey, it can’t hurt to ask, you know?
Thanks for the response. The lenders aren’t the problem. I have a lender that will do the loans. Its more my realtor telling me its illegal. After talking with my lender she suggested doing a double close. She said the realtor is simply wrong.
Now I’m confused. Is it your lender who wants the assigns clause removed, or some other lender?
Also, why a double close? That eats into your profits quite a bit, too. If the buyer’s lender doesn’t have seasoning issues, then just assign the contract for a reasonable fee…
if one of the two parties involved in the contract, in this case the seller, will not agree to and/or assigns you cannot assign. The legality is doing what the contract reads, not skirting around it. Assigning in itself is not illegal, as long as both parties agree.
I am writing from first hand knowledge, so take it for what it is worth.
I have done 40 “flips”, but I prefer to call wholesale deals this year. First, fire your realtor. Seriously, she has to go. She is clueless and will lose you deals as you get more on your plate.
Second, do a double close. I always buy my properties, then resell. The next three posts will probably say otherwise, but this is why I always buy my properties.
By purchasing the property you are not under the gun to get a quick resell before the contract expires. I know that it costs money in closing costs, but I justify the expense as a cost of doing business. Also, the title company knows that you will bring the resale back to them and if you do enough, you can negotiate a good price. I always tell my buyers that the title work is done and we call settle in 2 to 3 days. I get a settlement date on a phone call.
When you have the time to properly market the property, by MLS using a realtor, you will get more money than by using even the best buyer’s list.