I've been doing flipping for about 3 years now and always payed cash. I will be closing on a single family house soon which I received a loan from a 2nd tier finance company. The mortgage officer who I question her input mentioned I have to wait 3 months before I can sell it? Since its a conventional loan I will think I can sell it asap. Is their a law or regulation or is it up to the finance company to decide? The property is located in Chicago, IL. Any input appreciated.
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
5y
Two possibilities.....
1) the lender gets charged back most of the fees they generate by the actual purchaser of the loa, if it is paid off within a certain time....which means the lender/loan officer won’t make any money, so they try to discourage it
2) if your buyer is using fha financing, they can’t execute the purchase contract within 90 days of your purchase....fha won’t fund it
Also, as to the first scenario, it is unlikely that you would buy, renovate, market, get a contract and actually close your sale within 90 days.
I've been doing flipping for about 3 years now and always payed cash. I will be closing on a single family house soon which I received a loan from a 2nd tier finance company. The mortgage officer who I question her input mentioned I have to wait 3 months before I can sell it? Since its a conventional loan I will think I can sell it asap. Is their a law or regulation or is it up to the finance company to decide? The property is located in Chicago, IL. Any input appreciated.
Thank you
The finance company doesn't make the determination on how quickly you can sell the property. You have to examine the Deed. If it's a foreclosure sometimes Fannie or Freddie put restrictions on the Deed that limit how quickly and how much you can sell the property for. Examine the Deed.
Chicago, IL · Member since 2016 · 165 posts · 49 votes
5y
I stated, "Ask if the 2nd tier finance company mentioned, has a penalty for selling early?" This may alter your decision in when you want to sell. Some companies have heavy penalties for selling early, as this is when they make the most money off the loan. Selling early can alter your decision on when to sell.
Thank you all for the info. The property is not a foreclosure or bank owned. I asked the finance company is there a penalty for paying the loan before 90 days and they said no, but only mentioned it was a standard 90 day timeframe before you can sell the property. When I'm ready to sell it which will be before the 90 days, I will reach out to my attorney if he can confirm and dig up some info.
Thank you all for the info. The property is not a foreclosure or bank owned. I asked the finance company is there a penalty for paying the loan before 90 days and they said no, but only mentioned it was a standard 90 day timeframe before you can sell the property. When I'm ready to sell it which will be before the 90 days, I will reach out to my attorney if he can confirm and dig up some info.
So either your the note you are signing contains language prohibiting the loan being paid off prior to 90 days or the loan officer was referring the buyer of your flip potentially using an FHA loan or a few conventional loan products out there that prohibit the buyer of your flip securing a loan until you have owned the property for 90 days. This is often referred to as the "Anti-Flip Rule"
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
5y
Two possibilities.....
1) the lender gets charged back most of the fees they generate by the actual purchaser of the loa, if it is paid off within a certain time....which means the lender/loan officer won’t make any money, so they try to discourage it
2) if your buyer is using fha financing, they can’t execute the purchase contract within 90 days of your purchase....fha won’t fund it
Also, as to the first scenario, it is unlikely that you would buy, renovate, market, get a contract and actually close your sale within 90 days.