BiggerPockets

This has been an issue for years here in Colorado. The major title companies were the first ones to have problems. Then the lender's wised-up....

Write the purchase contract as a company...then sell the company to the final investor for a cash payment.. It's easy to create an LLC for every property, then sell the company and everything it owns to the final investor. The proceeds are payable to the company so that solves the problem. This way you have one closing with the final buyer and only have to wait the initial seasoning period. Also if you can prove with receipts for improvements that are close to the same amount of increase from initial purchase to end user sale...you can often get the lender to waive the seasoning requirement because you are proving why to home went up in value in such a short time.

I can't say I'm a successful flipper, but I did manage to refi a property back in July that I bought only in April. Actually, as far as the official documents, I bought it only days before the refi, thanks to the title company screwing up the recording. Seasoning wasn't a problem, but it did take a long time to complete the refi. It was a REO, and I did a bunch of work on it (pictures in my gallery, if you're curious.) The new lender did some sort of review on the new appraisal, and wanted info about what rehab had been performed. The lender was Wachovia. Still, the purchase price plus the rehab cost was quite a bit less than the new appraisal, and they ok'ed it.

I think this would be much more of an issue if you had done nothing to the property. I'd guess it will be much more difficult to do quickly, based on things my mortgage broker has said. One of Bronchick's sayings is "the best comp for a property is ... itself." If its bought for some price, and nothing is done, its pretty hard to justify a higher price.

My group has been buying, rehabbing and selling over 20 properties a month in Indianapolis, and we just launched this program in Atlanta, with 5 successful deals in October.

We basically are able to offer a No Money Down deal by selling properties with a private note and mortgage at a purchase price based on 65% of the current appraised value. Then the buyer does a rate & term refi out of the note within 45 days. No seasoning issues with this method.

The key is you must own your properties for Cash, buy them correctly, and do a sensible rehab for it to be successful.

We do not make a lot of money on each deal like the good ole days, but decent profits happen based on the volume we can do.

Our biggest problem at the moment is the 4 mortgage rule, but we are working on that! :lol:

OK Will,

In a previous thread, you were explaining that by transfering a property to a LLC, then selling that LLC to the buyer would get around the seasoning issue. I replied that it would not, because the buyers lender would still want to see the title on the property. You replied basically, that I was confused and you had a way around this.

Now you are saying in this thread that selling the LLC wouldn't make the seasoning issue go away.

Which is it?

[Can you specifically explain how you avoided/circumvented the current standard seasoning of 6 months for a NOO loan (non-owner occupied)

Have you had success flipping to a retail end user and avoided seasoning issues of the standard 3 months on FHA loans? ]

How about Seller Carry with a stop at the seasoning period? ..I have not done exactly this. We usually rehab before flip. takes time, adds value. The 3 month FHA has gotten in the way.

Will,

Found it.. It looks to be on the same topic following the procedures..

http://www.biggerpockets.com/forums/16/topics/23999-seasoning-issue?highlight=

I agree.. Not that I would support it, but for public service.. How would one do it illegally.?

There is absolutely no fraud involved, everything is disclosed on the HUD, and the program has been created and approved via a solid team of attorneys in multiple states.

We can use ANY title company, deeds are recorded, the bank does their own appraisal, and EVERYTHING is disclosed.

If the banks appraisal comes in less than our value, then the investor gets an even better deal!!

Let me make this crystal clear: There is no kick-back, and no cash out to anybody. The price of the home IS the 65% of what the bank tells us the home is worth, and that is what the lender has the mortgage at, and the price that the investor pays, PERIOD.

I understand the concerns, and know that It is due to all of the "cash back" programs and appraisal fraud of the past. That is not what we are about.

As a well respected Broker and Investor, I have too much to lose to deal with fraudulent activity. If I EVER caught wind of ANYBODY in my network doing something illegal, they would be banished IMMEDIATELY!

The investors who buy these homes are folks looking for a long term hold that will cash flow.

We have found one regional lender that will do 8 mortgages, and the last four are being based on 55% of value, so the investor will need to bring a little money to the table on these deals. We are also hearing that 6 month seasoning is coming on these rate and term refi's, and we will probably just revamp and hold the notes and mortgages for the 6 months. It will slow us down initially, but nothing we can't work through.

If you, or your Mortgage Broker needs some clarification, simply have them call me anytime!

Good old seasoning! Annoying isn't it. It's assumed that we're committing fraud. Early this year we had a house sold three days after we had it because the fix was light and the buyer came with conventional financing. Wish they we all that easy.

We've been holding on even starting a fix until almost a month after we close a property. Almost all buyers are coming with FHA and there's no way around that we've seen.

We had the FHA/HUD outreach manager speak with us about this issue. She said this rule was not up for consideration at this time. See Nancy West in our archives.

http://www.thenorrisgroup.com/archives_byguestspeaker.php

Bruce also brought this up as one of his solutions in our "I Survived Real Estate 2008" fundraiser we did. If you haven't had a chance to watch it, I think it's one of the most important things you'll watch all year! Seriously. It's free and extremely interesting to hear the different solutions from the different sectors.

http://www.thenorrisgroup.com/isurvivedrealestate2008.html

Our hard money doesn't have any seasoning period so not sure about that. if the property is flipped I believe Craig asks the new investor to refinance with us or with another lender. Not sure about that one.

In a downturn we really focus on first time buyer inventory. That typically means the buyers will be coming with FHA in this market so we don't fight it. We calculate that into our holding costs and include it in the offer.

Harrison Painter wrote: We basically are able to offer a No Money Down deal by selling properties with a private note and mortgage at a purchase price based on 65% of the current appraised value. Then the buyer does a rate & term refi out of the note within 45 days. No seasoning issues with this method.

Please clarify. What happened to the other 35% of value?