OUCH!!!! Definitely not the answer I was looking for! I was hoping that SOMEBODY had some luck with an understanding mortgage broker. Maybe I'm dreaming.
Are you guys just holding on to your properties for 90+ days, re-selling to investors for cash or ???? This doing 1-2 houses a year stuff bites!
The best way to deal with this is to be up front about it. Provide the lender with a description and cost of each item being repaired or replaced and give before, during, and after photos.
If you can prove that you've added value to the property to substantiate a higher appraisal, you should have no problem.
I've been concerned about this also but the most I've ever been asked for is lien waivers from the contracts that did the work (due to mechanics liens having 90 days to file in Iowa). I haven't run into any seasoning issues yet.
Thanks myfrogger. Did that and more on the last one. We were pushing the market (HARD) per sq. ft. and provided the appraiser with 5 pages of before / after photos and a detailed 3 page list of EVERYTHING that was done. Have you been telling your buyers (and their lenders) that you are an investor?
lacashman- look up:
Prohibition of Property Flipping in HUD's Single Family Mortgage Insurance Programs
24 CFR Part 203
Effective Date: June 2, 2003
We were caught unanware of this ruling in July 2003. Two hours before we were to close on a property, the (conventional) lender absolutely refused to close on the loan because we were "flippers". Nevermind the inspector and appraiser gave glowing reports of the property "...best rehab they've ever seen...etc." , we put all new electrical, ac, kitchen, bathroom, etc. and had receipts for everything we did. Didn't matter to the underwriter a bit. Not only did we lose that contract, but we had to wait another 35 days to close (90 day rule) AND had to sell the home for $11,000 less!!!!! (can't sell for more than going rate for similar homes rule).
Conventional lenders and VA loans have no seasoning restrictions. But they will probably look closely at the appraisal and not let you get absolute top dollar.
It is the subprime lenders and FHA where seasoning is an issue.
So right up front, get proof of funds and check that their lender is cash or you have to call the lender and verify that they do not have seasoning restrictions.
As long as your buyers aren't going with an FHA or VA loan there is absolutely NO PROBLEM. I close about 10-12 of these a month.
The only hint of a problem I've ever run into is that a lender thoroughly checked the chain of title to make sure it didn't get passed around from investor to investor in a short period of time inflating the value. The lender did a field review appraisal to justify the value and it was fine.
Try calling the different mortgage brokers in your area and ask if they work with REI. You might get better help from brokers that have this experience.
Just an idea... I have heard from a lot of people on this site that it is very important to have the right mortgage broker on your side.
lassitermarketing, I sold a home that I owned for three months to a couple that got a VA loan. Just because thre are seasoning restrictions in FHA does not make it apply to VA.
lassitermarketing, forgot to ask - you say that you have done 10-12 of these. Were they conventional lenders or were they subprime (B/C) lenders? All conventional lenders have no seasoning restrictions. Some B/C lenders have seasoning restricitons.
We have discussed the properties. What about the borrowers? Any issues about being close to the line (low credit scores, small down payment, etc)?
Have you found a mortgage broker who can deal with the situation? I would expect that folks doing deals can point you to the people they use. Even if the person does not operate in your area they may be able to point you to a national lender so a local broker can make contact.
You definiltey might have to coach the buyers as to which lenders will work better.
I have found that with my rehabs in the past year, that I have simply had to explaint to the appraiser that I bought the house under market value due to an estate or otherwise. Then I tell the appraiser what the property was like before and what work work was done to the property (photos help) and I haven't had any problems. The appraiser writes an addendum stating that the property was originally undervalued adn was remodled. The banks have all been satisfied. My bigger concern is with appraisers who don't like to do their job and prefer to use the last sale price in determining their values. I have told the banks when selling or buying properties that I would prefer that they not use certain appraisers. In fact, if I'm paying for the appraisal, I will insist that a certain appraiser not be used or I will not pay for it. If it's the buyer, I don't have much to say.
A lot of lenders already had seasoning requirements before this rule was put in place. 12 months was and is quite common.
This is an issue nationwide. To put it simply it is best to find lenders who do not have this requirement or will work with you if you have rehabed the property. Some lenders will waive the reuirement if you show that the property was rehabed.
Then you can recomend that your buyers use these lenders.
I only got 3 words.
Hard Money Lender.
Thats all I know.
Tks
OUCH!!!! Definitely not the answer I was looking for! I was hoping that SOMEBODY had some luck with an understanding mortgage broker. Maybe I'm dreaming.
Are you guys just holding on to your properties for 90+ days, re-selling to investors for cash or ???? This doing 1-2 houses a year stuff bites!
The best way to deal with this is to be up front about it. Provide the lender with a description and cost of each item being repaired or replaced and give before, during, and after photos.
If you can prove that you've added value to the property to substantiate a higher appraisal, you should have no problem.
I've been concerned about this also but the most I've ever been asked for is lien waivers from the contracts that did the work (due to mechanics liens having 90 days to file in Iowa). I haven't run into any seasoning issues yet.
GOOD LUCK
What "anti-flipping" legislation? I have not seen any laws.
I have seen lender requirements but no laws.
Thanks myfrogger. Did that and more on the last one. We were pushing the market (HARD) per sq. ft. and provided the appraiser with 5 pages of before / after photos and a detailed 3 page list of EVERYTHING that was done. Have you been telling your buyers (and their lenders) that you are an investor?
lacashman- look up:
Prohibition of Property Flipping in HUD's Single Family Mortgage Insurance Programs
24 CFR Part 203
Effective Date: June 2, 2003
We were caught unanware of this ruling in July 2003. Two hours before we were to close on a property, the (conventional) lender absolutely refused to close on the loan because we were "flippers". Nevermind the inspector and appraiser gave glowing reports of the property "...best rehab they've ever seen...etc." , we put all new electrical, ac, kitchen, bathroom, etc. and had receipts for everything we did. Didn't matter to the underwriter a bit. Not only did we lose that contract, but we had to wait another 35 days to close (90 day rule) AND had to sell the home for $11,000 less!!!!! (can't sell for more than going rate for similar homes rule).
How are you guys getting around this?
We work with 2 mortgage brokers that have B/C programs that don't use gov't money so the rule doens;t apply
Our greatest success in in holding 1 year as a rental then selling (plus the cap gains is less!!!).
Since neither of our main options is all that appealing to us, I sure hope some others chirp in with some good ideas.
Conventional lenders and VA loans have no seasoning restrictions. But they will probably look closely at the appraisal and not let you get absolute top dollar.
It is the subprime lenders and FHA where seasoning is an issue.
So right up front, get proof of funds and check that their lender is cash or you have to call the lender and verify that they do not have seasoning restrictions.
Brenda
As long as your buyers aren't going with an FHA or VA loan there is absolutely NO PROBLEM. I close about 10-12 of these a month.
The only hint of a problem I've ever run into is that a lender thoroughly checked the chain of title to make sure it didn't get passed around from investor to investor in a short period of time inflating the value. The lender did a field review appraisal to justify the value and it was fine.
Inspectorq
Try calling the different mortgage brokers in your area and ask if they work with REI. You might get better help from brokers that have this experience.
Just an idea... I have heard from a lot of people on this site that it is very important to have the right mortgage broker on your side.
Good Luck
Andy
lassitermarketing, I sold a home that I owned for three months to a couple that got a VA loan. Just because thre are seasoning restrictions in FHA does not make it apply to VA.
Brenda
lassitermarketing, forgot to ask - you say that you have done 10-12 of these. Were they conventional lenders or were they subprime (B/C) lenders? All conventional lenders have no seasoning restrictions. Some B/C lenders have seasoning restricitons.
Brenda
We have discussed the properties. What about the borrowers? Any issues about being close to the line (low credit scores, small down payment, etc)?
Have you found a mortgage broker who can deal with the situation? I would expect that folks doing deals can point you to the people they use. Even if the person does not operate in your area they may be able to point you to a national lender so a local broker can make contact.
You definiltey might have to coach the buyers as to which lenders will work better.
John
[addsig]
I have found that with my rehabs in the past year, that I have simply had to explaint to the appraiser that I bought the house under market value due to an estate or otherwise. Then I tell the appraiser what the property was like before and what work work was done to the property (photos help) and I haven't had any problems. The appraiser writes an addendum stating that the property was originally undervalued adn was remodled. The banks have all been satisfied. My bigger concern is with appraisers who don't like to do their job and prefer to use the last sale price in determining their values. I have told the banks when selling or buying properties that I would prefer that they not use certain appraisers. In fact, if I'm paying for the appraisal, I will insist that a certain appraiser not be used or I will not pay for it. If it's the buyer, I don't have much to say.
Quote:
lacashman- look up:
Prohibition of Property Flipping in HUD's Single Family Mortgage Insurance Programs
24 CFR Part 203
Effective Date: June 2, 2003
That is not a law!
It is a rule on funding HUD loans.
A lot of lenders already had seasoning requirements before this rule was put in place. 12 months was and is quite common.
This is an issue nationwide. To put it simply it is best to find lenders who do not have this requirement or will work with you if you have rehabed the property. Some lenders will waive the reuirement if you show that the property was rehabed.
Then you can recomend that your buyers use these lenders.