Seasoning Issues

I have a house that I was able to buy at a huge discount because it was almost in foreclosure. I am now trying to sell the house, but my buyer has been turned down by several banks for the loan because of the title seasoning (one month). This is a huge problem!

I also have another house that I am trying to purchase through a bank by doing a short sale. I am getting a pretty good deal because the house needs quite a bit of rehab work. Am I going to have this problem on this house too?

What solutions can you suggest?

Keli Ancasta

This is a challenge that you will run into again and again.

Many, if not all, lenders are now requiring title be held for six (6) months.

I use a lender for such conditions called PEMM.TEK, ask your local broker if they are in your state. They have no ownership seasoning and will use current appraisal. They do send appraisal to review so be rdy for it. They have alot of flexible programs.


There are lenders that will do loans with no seasoning. Most of them depend on the credit of the buyer. Do away with the banks and steer your buyers to your mortgage broker that knows where to go to get no seasoning loans for owner occupants.

I think seasoning is a major problem for folks who find a great deal on a house that doesn’t require a rehab. Banks don’t seem to understand that someone might be able to buy wholesale, then re-sell retail.

However, I haven’t had this problem with rehabbed houses.

FHA imposes restrictions on houses owned for less than a year, but if you can show that you did a rehab to justify a change in value, you shouldn’t have a problem. (FHA doesn’t allow financing on any home owned less than 90 days.)

A few weeks ago, I sold a house I’d owned less than 90 days. I paid $30k and sold it for $83k. Coldwell Banker Mortgage was the lender and the loan was conventional, not FHA (which meant the 90 day requirement didn’t create a problem). What really surprised me was that Coldwell Banker didn’t even require a standard appraisal…just a drive-by.

I’ve been using Bank of America as the primary lender for my buyers. They don’t have any problem with homes held in that 91+ day window. Also, B of A has conventional programs, as well, that don’t require the FHA Valuation Conditions. I just sold a house on Thursday that I paid $6,500 for and resold about six months later for $63,000. B of A didn’t even blink. (It was done through their conventional program.)

I’m working in Baltimore, where flipping fraud has drawn national attention, so lenders, appraisers and FHA are real careful here…yet I really haven’t had problems. Sometimes, lenders or appraisers will ask for a scope of work, a couple times I’ve been asked for receipts for work. Generally, there are no issues at all.

Ron Guy

I think my industry was ‘made’ for this problem.

Obviously if your buyer can get a traditional loan that is the first and best choice. If you can wait the 90+ days (if it is a REHAB) and you have lenders that will work with that on a rehab deal - then great! But if you need the cash on a rehab BEFORE that 90 day mark, or there is no rehab work, then the following strategy might work. I have copied and pasted a small article that I recently wrote regarding these title seasoning issues. I hope it helps. HERE YOU GO:

Trying to flip a property can turn ugly when your end buyer cannot get financing because their lending institution requires title seasoning. Your options are to 1) find another lender; 2) find another buyer, 3) try to ‘assign’ your Contract for your profit; or 4) find a creative strategy to get your deal closed. This article is about the last option – using creative financing to overcome traditional lending institutional guideline problems including, but not limited to the title seasoning issues.

Everyone has probably heard about the strategy of creating a seller financed note to structure a deal and then selling the note at the closing table to a note investor to fund the deal. If you have not heard of this strategy, read up on it! It is a great tool to have in your back pocket when traditional financing is not possible – or not desired – for one reason or another. You can read about this on any note investor discussion board. Assuming you are already aware of this strategy… you should also know that this is a great tool to use when FLIPPING a property – If – and only if - you have enough profit in the deal to cover the note discount. More about that later.

When I use the term ‘flipping’, I am referring to simultaneously buying a property at a discount (i.e., pre-foreclosure, distressed seller, etc.) and then selling it at it’s true fair market value to an ‘end buyer’. In this article I am not talking about rehabbing properties. The same seller financing strategy can work (more easily, actually) with rehabbed properties, but for this discussion I am referring to strait FLIPS.

This example deal is set up as follows: Assume you can purchase a property for $70,000 because the seller is 2 months behind and knows he will go into foreclosure if he doesn’t act quickly. You then set up a Buyer to purchase the property from you for its true market value of $100,000. This end buyer can put down 5% in cash at closing and has reasonable credit (600+). You can either purchase the property outright and do a 2nd closing later – or set it up as a simultaneous closing and transfer the title twice at closing. Either way, your end buyer’s bank may not fund your deal because of this ‘flip’. If that happens, you can structure your deal as Seller Financed- even if there are underlying mortgages! Your title company / closing agent or note buyer will prepare the note and mortgage for you for the closing. The note buyer on this deal might want an additional 5% 2nd position note to be ‘held’ by the seller. That would leave a 90% first lien. The interest rate might be between 8 and 9% depending upon the Buyer’s credit. The note buyer should buy the note for between 85% and 90% of the MORTGAGE balance ($90,000 x .87 = 78,300, for example) depending upon the property and the situation. So the flipper (that’s YOU) would have $78,300 from the note buyer PLUS $5,000 cash down payment from the Buyer – for a total cash amount of $83,300 PLUS the $5,000 2nd position lien. The underlying payoff of $70,000 would be made to the original seller at closing and the balance of $13,300 plus the $5,000 note is all yours. Not bad for a deal that you didn’t spend a dime on! While the discount on this ‘flip’ might seem a bit steep at first, keep in mind that the only alternative is to hold the note. The time value of money tells us that cash now is worth more than cash payments streaming in over time.

Rehabbed properties and properties without title seasoning problems can also be set up this way. These properties are currently being set up at 95%LTV (Loan to Value) – EVEN INVESTMENT RESIDENTIAL PROPERTIES! The discount on the note is usually about $6,000 -$7,000 if set up properly from the beginning. The buyer is really getting a deal here. Where can you buy investment property with 5% down?

I hope you find this article informative and helpful. I hope it gets the creative juices flowing!

Michele Robbins, CPA

The PAC Trust system is the answer to all seasoning issues.

YES,…The lenders are wise to the flipping. You need to provide a title with a chain of title for a least 3 months.