Has anybody bought an REO Property Marked it up and sell it right away at Fair Market Value? How can I get around Title Seasoning?
Sorry for the rookie questions.
Ex: Purchase Price $308,000.00
Fair Market Value $ 535,000.00
If I bought today, will I have a problem closing the deal if I sold it within 30days?
Thanks,
There is definitely a seasoning issue. However, not every lender will make seasoning an issue. I have been having some success lately with REO’s but I have been shooting for those that are in poor condition. I have made minor fixes and cleanup and been reselling to investors looking for rehabs.
End users are tougher but if they have down payments and are going conventional financing you should be able to pull it off.
Thank you Marketingmaster,
The REO properties that I’m purchasing I cherry pick so pretty much they’re in move-in conditions with the exception of very minor touch ups like Paint and Rug replacement.
So you are saying that as long as the end buyer comes in with a down payment +/- say 10% and we go conventional financing, I should be O.K.
Again Thanks
Marketingmaster,
I forgot to ask you, do you know of any Lender that will not have an issue?
Thanks,
Think local banks. We buy REO’s and target some of these to O-O’s on a quick flip transaction. Most of my buyers are first time homebuyers and go 100% financing. Other lenders are looking for 5% down. The seasoning is not an issue with some local banks we are doing business with. They are concerned with LTV, credit, dti, etc.
Nate-WI
Thanks Gordo2417
I will do my homework with my local banks.
Again Thanks
REOs are typically only 10% or less below market value, so we never mess with them. All the beginning investors and owner-occupants can fight over REO properties, which are often listed on MLS.
Most investors buy at 70% ARV. According to your numbers, the house is worth $535k ARV or current market value? If it’s current market value then why wouldn’t the bank have it listed higher?
If you meant ARV, 70% would be $374k total that you can pay for acquisition, closing costs, fees, and repairs. That means you only have $74k to fix up the property to bring it to market condition if you’re following the standard formula. We typically calculate 10% for sales fees, staging, agent fees, etc. which leaves you 20% profit and cushion.
As for seasoning, FHA lenders will have a problem, but this home is above the FHA limit and you just need a conventional lender who can do the loan no problem. A major problem you’ll encounter is that the jumbo loan market is still having problems. The limit is $417k. If you try to sell the house for $535k, your buyer have a tough time getting a loan of $428k ( 20% down) because that’s above the conventional loan limit and counts as a jumbo mortgage.
Hey deeinaustin,
This property was never listed on the MLS that I know of. I just bought it through auction. I was just worried about the seasoning issue because I was getting rid of it right away. I found a buyer with 10% down 754 fico and now I’m just going to have to see what happends. I’m hoping that because I purchased it with under my Inc. I have no seasoning issues.
I also found another one, this one was listed on the MLS for $470,000.00 for 44 days and didn’t sell but everything else around it has sold for about $500,000.00-$515,000.00. Last comparable was about 1 1/2 months ago and sold for $510,000.00. My winning bid was for $317,000.00 from the REO auction and it’s in excellent condition (Structure) just needs carpet.
I will difinetly post an up-date after this deal. If all goes well I should be closing within the next 21-30 days.
Thanks,
You may mean your county auction then. REOs are foreclosures that go to auction and the bank purchases them, then resells them. From what you’re saying, the bank is selling a property that they foreclosed on (at an auction?. I haven’t seen in our area where the bank will hold another auction after they’ve already purchased at the county sale.
Anyway, yes, there could be a title seasoning issue, but I had lenders ready who will do a conventional loan with no title seasoning. Now that the mortgage market has changed, you have two issues 1) jumbo loans are tough to get, so you may not have a qualified buyer or limit the number of buyers and 2) underwriters may not be willing to do no seasoning.
I agree with DEE. I don’t mess with REO’s b/c they are typically too close to retail value. Here’s how some investor’s I know have bought REO’s:
Example:
House worth: $200K
Purchase price: $130K
Repairs: $12K (cosmetics)
Earnest $: $120K
Option$: $10K
Closing: 1 week.
Bank says yes.
Of course, since it’s an REO, there is the opportunity to see the property & get a contractor or inspector in there to figure out repairs.