Bank has different criteria for evaluating quick flips

4 Replies

Wondering if fellow investors have run into this situation. Our current prospective buyers are using Bank of America which is giving the appraiser and our real estate agent a hard time. The BofA underwriter says that property owned by a flipper for less than 9 months is evaluated differently under their guidelines and they want to see our cost of material and labor for the improvements.

This property appraised fine, but the delta is 300k in just 6 months, so they are pulling out the microscope. This is all probably just CYA for the underwriter to be able to agree with the appraiser that the value rose that much in such a short period, but it seems unjustified since the value of a residential property is what someone will pay, not the cost of the rehab. It was a dump and is now a beautiful home, but the buyer's bank is pushing back.

Anyone have any experience along these lines and/or figured out what to say to the bank to satisfy them after doing a flip? Any thoughts or suggestions would be greatly appreciated.

I know that there is a certain amount of time that they look back at the original cost of the property (I think its 1 year)  but I am sure each bank has there own policy's if they are giving you a hard time tell the buyer to use a different bank or a broker that will know what banks to use for such a scenario.  

This post has been removed.

The bank picked the appraiser and ordered the appraisal.

I don't think they are questioning the value, but they are saying the have different criteria for evaluating short-term holds. Not sure what those criteria are or what it is going to take to make them happy. I am hoping I can get some insight to what they want because I don't think it is appropriate for them to ask me to lay out my financial details and show my profit just because it is a flip.

Originally posted by @Mark O'Brien :

The bank picked the appraiser and ordered the appraisal.

I don't think they are questioning the value, but they are saying the have different criteria for evaluating short-term holds. Not sure what those criteria are or what it is going to take to make them happy. I am hoping I can get some insight to what they want because I don't think it is appropriate for them to ask me to lay out my financial details and show my profit just because it is a flip.

 Have you tried asking them directly what their criteria is? You are the owner you have the power. If the buyer's bank doesn't want to play ball, but you have an asset that is valued properly, tell those buyers to find another lender.

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