Its A Scam---gotta Wait 12 Months.
i heard from a realtor and a mortgage broker that if you buy a property to rehab or flip you better hope you can hold for 1 year. Lets say you buy it for 50k but FMV is 90k. you spend hard earned money and time doing the fix-ups. You put her on the market, find a buyer, only to find out that the lender wont do the loan because they say they need 12months chain of title. they will only loan up to your purchace price of 50k !!!
i was told that due to the racketeering and fluufing prices banks are doing this
What do you guy's do??
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B.G. & Wheeler D. LLc Inc.
(A division of: Half Vast Enterprises)[ Edited by WheelerDealer on Date 12/24/2003 ]
I think they passed that law this year,It only applies to if the buyer is getting an FHA loan and also it depends on the lender how picky they want to be
A lot of banks are requiring this which they call seasoning. But there are a lot banks that dont. Just call around should not have much trouble.
[ Edited by TRISHLEWIS on Date 12/30/2003 ]
dont you limit your buyers especailly if they are interest and point shoppers?
i mean the public doesnt kno the market like we are supposed to know it, so wouldnt they just move on to a deal isnt so hard even though they may be paying more for it?
Doing a wrap is the easy way out buy only if i have a kick but rate AND i want assume the liability by having to back it??
What do all of you do when you buy a steal and want to flip it?
Any loop holes??
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trish,
this is not the first time i heard this. Why is your take different?
OH! Im in Austin too...Are you full time?
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[ Edited by TRISHLEWIS on Date 12/30/2003 ]
Refer to this thread:
http://www.thecreativeinvestor.com/ViewTopic18300-19.html
HBG
Fabulous,
Did you write that? gotta post it as an article. if it wasnt already
Why then are we not hearing more investors on this site talking about getting in jam with this?
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I thought seasoning on a FHA was three to six months? Is there something I'm missing?
Dee
Here is a fairly good explination of the HUD rule (its a rule not a law).
http://www.foreclosures.com/forecast/ff_Sep03/default.asp?topic=legal
Now as to non HUD / FHA loans. Most A paper lenders have a 12 month rule that they use.
Lots of banks do not have these rules. It is better to find a local bank that keeps the paper that they write.
Some lenders do not have a seasoning requirement. And lenders are more flexible on OO than on NOO.
Lenders change are always changing the rules but if you work with a good broker they can keep up with which lender will do what.[ Edited by lacashman on Date 12/24/2003 ]
This is becoming a big issue for investors.
The anti flipping campaign brought on by the idiot scammers/investors can be thnked for this. Lenders want to see seasoned title. They figure if the property was held on to for a year, there is less likely going to be a problem with the property. You read about this everyday where investors team up with appraisers and mortgage companies, sell a property picked up below market to a c/d credit buyer. Property is supposed to be fixed up by buyer, but buyer can barely afford mortgage. Buyer defaults on mortgage and lender ends up with distressed property back on the books via foreclosure. Hard to understand how so many are sliding through the woodwork, right ? Well this is the reason for the title seasoning. Its the lenders answer to dealing with this. There are many sub prime lenders that will do these deals, Usually they are 80%-90% deals with make the seller do carrybacks. I hope the fed cracks down on these investors that are ruining the market for the legit ones.
I have been told that severe documentation outlining the increased value will let the banks overlook the seasoning issures. Before and after pictures and list of costs that can be verified with receipts and what-not if desired. Basically it is better to be prepared than not.
However, dealing with a good mortgage broker they can market loans that seasoning will not be an issue for. I had this same concern and decided it is a non-issue for me.
Does documentation skirt the issue?
Regardless of how you pay for the property is the sales price always recorded??
is that what a PAR report is used for?
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Here is a special alert from the Maryland attorney generals office. Home Buyers: Beware of flipping scams. http://www.oag.state.md.us/Consumer/flipbrochure.pdf
The problem with the government is that they make flipping sound illegal, they don't tell that there is a legal way to flip real estate. I sent an e-mail to them stating just that. If more of us would object to blanket statements by the various gov agencies maybe they would tell both sides of the issue. But then again maybe not. [ Edited by wpruett on Date 12/25/2003 ]
I'm sure the laws and lender requirements are different in different areas. However, I am in Alabama and I was buying a piece of property by way of "Contract for Deed". I had signed the agreement to pay a set amount for eighteen months then ballon the balance to the seller. The day I received the signed agreement from the seller, I went to cover the windows and doors to avoid vandalizsm until I could get to work on it. I told a friend about the recent purchase and he wanted to ride with me to see the house. As I was covering the windows, I asked him jokingly if he wanted to buy it. He said maybe, if the price was right. I told him he could order an appraisal and I would sell it for what it appraised. Two days later we were signing a contract that net me $12,000. I did a simultanious closing and walked away with a $12,000 check in my pocket after all was settled. The new buyer used a local bank and seasoning was not a requirement. A chain of title was. I used the same title company to close both deals, and the only thing I had to make sure of was that the recording of my purchase from my seller was recorded before the sell to my purchaser. Don't know if this helps any, but lenders do vary with their requirements.
Regardless of how you pay for the property is the sales price always recorded??
is this what a "chain of title" is?
is that what a PAR report is used for?
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In Iowa we are required to complete what we call a "Declaration of Value" which is given to the assessor's office. This information is public knowlege that any idiot with a computer can access on the internet. Very annoying but it is a requirement for any deed or contract to be recorded so we live with it.
WheelerDealer
The "Chain of Title" is just a paper trail that shows ownership of the property. Usually for Title Insurance, it for the past 15 years. it has nothing to do with the cost of the properety. In many states, the cost is recorded on the cover as $10 if you chose not to disclose the cost.(It's not a requirement). The recorded document in detail gives you the detailed info if you chose to pull it.
Esuccess,
If that is true then what is all the 12 mos chain of title about then? Not having the sale price disclosed seems to mess everything up?? help with this.
If the bank wont loan to a new buyer (this is what this whole thread is about) cause you got a good deal , but you only record 10 dollars as the sale price----where is the check to this balance??
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This is much ado about nothing. In September I flipped a property to a retail buyer for a lot more than my purchase price. They were not using an FHA loan and the property appraised out for the sale amount.
Now if this had been an FHA loan we couldn't have done it. But if I had rehabbed it and then sold it retail with FHA loan we would be ok as long as we could justify the price increase. A well documented rehab supported by 2 appraisals (FHA rule) will make this work.
If you go the FHA website and read the rule you'll have all your questions answered. Many realtors are clueless about this and there seems to be a lot of misunderstanding and unnecessary panic surrounding this new FHA rule.
Quote:Regardless of how you pay for the property is the sales price always recorded??Here in Florida sales price was not recorded, and people would buy more doc stamps than they needed and "overstamp" the deed to make the price look higher. The law changed and that went away. But it may still be around in states where historically less real estate shenanigans have gone on.
seasoning issues may or may not be a result of scammers..either way, i dont believe a law has been passed restricting lending practices. as mentioned above, it is merely a guideline for government backed loans..a good broker or excellent docs to the lender should get through to conventional lenders..in as many guidelines or laws coming down the pike, there will always be just as many creative ways to buy and sell..with foreclosures at an all time high and equally as high are government repos. passing a law through HUD would not make sense..im convinced that investors like us do in fact make a noticeable impact in reducing the these REO's..seasoning is a protective measure, and rightly so, and more due dilegence is required by us as the buyer and seller to our lenders of choice..just my 2 cents