Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
This is my first short sale, and I'm representing the investor in an A -B, B - C transaction, the investor being B.
The bank has done the BPO and verbally approved a price. My investor is almost on board with that. I've listed the house for him and we've gotten several acceptable offers from end buyers.
Unfortunately, they're all FHA buyers, and FHA lenders will not allow a B - C transaction without the seller (B) being on title the day of closing. Apparently, FHA will not even order an appraisal or take a mortgage app from the end buyer unless that is the case.
Has anyone successfully completed a short sale with an FHA buyer? Thank you!
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
16y
Originally posted by Aly L:
Has anyone successfully completed a short sale with an FHA buyer? Thank you!
No, not a flip. Your investor should find a transactional lender or a hard-money guy willing to hold for 30 days.
The real problem is that FHA buyers are very sensitive to costs and they are usually skating on thin ice when it comes to credit score.
I had a Fix n Flip I was trying to sell not too long ago. I had three FHA buyers fail to close where two were using their credit cards to buy crap for their new home and their credit scores dropped too low and another who could not come up with enough money to close.
Lesson here is FHA buyer's are here today and gone tomorrow. They are the most fickle and least educated of buyers. The risk is too great to close and carry for an FHA buyer.
Chances are, if your attracting only FHA buyer's then your price is too high.
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
16y
A land trust will not likely work because the deal was already submitted and accepted.
Land Trusts, in theory, will help you avoid seasoning, but as most FHA underwriters will tell you, the FHA waiver of 90 day seasoning are minimum requirements. Lenders still have skin in the game I know of no underwriter willing to put their butts on the line.
If anyone has acomplished a short sale flip to an FHA buyer using transactional funding, please chime in!
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
16y
Originally posted by Aly L:
Has anyone successfully completed a short sale with an FHA buyer? Thank you!
No, not a flip. Your investor should find a transactional lender or a hard-money guy willing to hold for 30 days.
The real problem is that FHA buyers are very sensitive to costs and they are usually skating on thin ice when it comes to credit score.
I had a Fix n Flip I was trying to sell not too long ago. I had three FHA buyers fail to close where two were using their credit cards to buy crap for their new home and their credit scores dropped too low and another who could not come up with enough money to close.
Lesson here is FHA buyer's are here today and gone tomorrow. They are the most fickle and least educated of buyers. The risk is too great to close and carry for an FHA buyer.
Chances are, if your attracting only FHA buyer's then your price is too high.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
16y
Thanks Scott and Michael. I'll have to talk to the title company re: deed. I was told something similar today by a short sale specialist. I'll look into that further.
Scott, you're right about FHA buyers. The listing says Conventional or cash buyers preferred. The price of the house is actually very reasonable and each offer has been full price, but the area is generally low income and most buyers will be FHA. I found a loan officer at Wells Fargo who may have some other type of programs for these first time buyers with little down, that are not under the same FHA guidelines.
Real Estate Investor · Ocala, FL · Member since 2008 · 742 posts · 463 votes
16y
The big key to getting a FHA Lender to consider this type of transaction is if they understand the deal, know all of the moving parts, and everything has been disclosed.
1) Understand the deal: You will need to be able for everyone to convey what is going to transpire.
2) Moving parts: All steps in both of the transactions must be made clear.
3) Disclosure: Having the FHA Lender fully disclosed about the transactions and all paperwork. Making sure your Title Company will convey to the FHA Lender what will and must happen for both transactions to close.
If you can get all of this to happen and get everyone to the table, then it "might" be possible.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
16y
Thanks James. I'll be talking to another lender tomorrow and there's no problem with transparency/disclosure. As Scott mentioned, the weak links here are the buyers themselves. If we can get the lender on board, we'll have to hope the buyer makes it to closing too.
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
16y
you might try aegisrepartners.com since your market is limited to FHA buyers. I have never personally used them, but I know another investor here on biggerpockets has used them in a 30 day hold shortsale flip.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
16y
Thanks all. I think the issue is more like, what non FHA mortgage programs would work for buyers with credit in the 600s and only 3% down in a simultaneous closing? In this day and age? :wink: