Using LLC (not trust) to bypass 90 day seasoning when selling to an FHA buyer

Foreclosures, Short Sales, Tax Foreclosures
1

I know that many people buy in a trust and re-assign the beneficiary interest in the trust to get around the 90 day seasoning issue. Can someone explain step by step how to do this when buying it in an LLC? I understand that you buy it in an LLC, then sell the LLC, not the house.

–how does the B - C contract look if you are selling the LLC versus a house? A real property purchase contract has many specific elements that an LLC purchase contract would not have. Does anyone have an example of how that contract would read?
–how does FHA approve a purchase on an LLC, not real property?

I would appreciate any other detailed info on how to do this since buying in a trust is not always an option.

2

I’ll take a stab at it. Title to the property has to be transferred to your “C” buyer. Yes, the LLC could make the purchase of the house from “A”, however, this is a direct transfer of ALL of the seller’s interests and it’s non-revocable. The Seller really would be giving up title to his house, and this needs to be done 90 days prior to the PURCHASE AGREEMENT being executed for the B-C transaction.

If you form a SPE (special purpose entity) of an LLC to make this purchase, then if your intention is to dissolve the LLC after the transfer to “C”, the LLC would just transfer title and you would cease operation of the LLC. I don’t think the short-sale lender, nor the “C” lender would have a problem with that, but you would have the increased cost of LLC creation, filing of the organizational docs, and in some states, those fees can be fairly steep.

So, whether held in a Trust, or held by an LLC, the title does need to “season” for 90 days before the C Buyer makes their offer. I believe either entity would held in preventing “nuisance” liens of the borrower from attaching to the property during the seasoning period, yet some state attorney’s general might frown on transferring the property into an LLC where the owner no longer has any beneficial interest. I’m not certain on that, but just a hunch.

Hopefully, you’ve kicked off a lively thread!