Seasoning of Title - What Is It?
Seasoning of title what is it?
There are two types of season of title issues that we face as investors.
1. Seasoning of title for refinance purposes.
a. For most investment deals its 6 months to use appraised value and get cash out. If you are planning on doing this save your receipts, take before and after photos.
b. One way I found to circumvent this is to have a partner with good credit as well. Sell the houses back and forth to get your cash out and/or get rid of hard money holding costs.
c. Or just sell the property if you need your cash. Buy three and sell one is a good mix for your holding patterns.
2. Seasoning of title for re-selling purposes
a. First and foremost, make sure the lender or mortgage broker doing financing knows about this up front. For the mortgage broker it will affect their choice of lender.
b. On a subject-to deal. Take title in the form on a land trust. One way is to use the former owner as your land trust name, i.e., If the Smith family is leaving the house, form the Smith Family land trust on paper, since the land trust is not recorded just the deed, naming the trustee, this will alleviate some lenders looking into seasoning of title. Now if pressed as to the ownership interests in the property, do not commit fraud - it is not worth it. But at face value it looks as though the owner simply formed a land trust to hold the title to their home. This should not trigger a due on sale clause, (on due on sale clauses the best way to not worry about that is to send the bank their money each month).
c. Choose the right appraiser. Have the addendum (in the appraisal) state the fact that it was a distressed sale due to differed maintenance and that the following work has been done to the house. The addendum should be detailed. Educate your appraiser to understand the difference between improvements and cured differed maintenance. Most improvements require permits. If you did a permitted job without a permit, do not claim the work was done on the appraisal. The appraisal review departments are becoming more, and more sophisticated. They will call you out on the carpet on this.
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