Hello,
What is title seasoning??? Is there anyway to go around it.
I will explain my case scenario:
If I buy a bank owned house, close on it and title comes under my name. After rehabbing it, if I try to sell it and then the buyer will have to go through a lender that doesnt have any title seasoning conditions. Is there any other way this can be done???
Please let me know.
I always look forward to the responses.
Ronnie
Sounds like you understand seasoning. It is nothing more than the seller’s/current owner’s time of ownership of said property. When talking about title seasoning, you may hear that the lender (whether it is your lender in refi situation or a buyer’s lender) requires 3, 6, 12, or 18 months seasoning. Some lenders, and more specifically for some types of loans (usually higher risk), require seasoning as a measure to combat the seemingly rampant property “flips” that got such bad press in the recent years. Flipping properties is totally legal. Loan fraud (not flipping), was the real root cause. So, title seasoning was one quantitative data point that the lender could see and check in an attempt to reduce their exposure on possible loan fraud.
To get around it: sell it to a better qualified buyer. A more qualified buyer may have more down payment, thus less likely their lender will have title seasoning on that loan product. For a buyer with FHA financing, the seller only needs 90 days on title. Or, you can sell it on a land contract and then make the buyer cash you out with a refinance 6 - 12 months later.
so, as a seller of rehabs, your options for dealing with seasoning are:
- sellers with good credit and good money down
- sellers with FHA loan
- land contracts - in order for seller/current owner to own property over 6 to 12 months…
these are the basics?
There are plenty of sub-prime loans that don’t require chain-of-title verification, even at 100% financing. I didn’t mean to imply that you could ONLY sell to “good credit” buyers.
Another way is to do a seller-carry-back second mortgage. Buyer gets 80% loan from a lender, you take back a second mortgage for 20% (or less if the buyer has some down payment money). As you reduce the risk for the lender, their loan programs will be less restrictive on chain-of-title/seasoning. Set the purchase price to be enough where 80% makes you a sufficient pay-day, the 20% is then just icing on the cake.
In general, just think creatively in this business.
Ronnie - thanks for the reply if I go this route and lets say she has a credit score in the low 500’s what are the chances that after 1 year she will be able to refi and get both loans in her name. I am trying to limit my risk so I am paying for the 20% seller second for 1 year - so there is no worry that this portion isn’t paid.
Thanks,
Tony
now when you take a seller second, the risks involved are basically, you’re in second position. if the buyer defaults 1st loan - uuumm, you could be in trouble in second position.
the way around this is - land trust? because?
also, if the buyer pays the 1st position mortgage, but doesn’t pay you - what can you do being in 2nd position? you can’t foreclose on the property - hello, second position! do you work out deal with 1st lender - to pay it off, and thus take back possession of the property?
i talked with a few brokers and my attorney - all said they would never let a client take a second position mortgage.
i’d say, ideally, if you’re going to do a no money down with a buyer, whereby, you hold a promissory note for your equity - that it be secured by real property of the buyer, period - not a second on the property you’re selling.
if the buyer can’t do that - find another buyer. am i being “noobish”?