Creative way to avoid seasoning issue & xfers - Posted by Robbie
Posted by Robbie on March 28, 2006 at 19:50:35:
I’m buying a house from a contractor of mine. In my state, transfer taxes are 3%. I’d like to do a quick rehab and re-sell to an owner-occupant. I’d rather avoid the transfers and eliminate any possible seasoning problem with my buyer’s lender.
Here’s what I’m thinking: Keep the house in the contractor’s name. Give him some money up front, but keep the title and the first mortgage in his name. Renovate (his) house. He sells to the eventual buyer, I get all the remaining proceeds. To protect my investment (since the house remains in his name), I create and record a second mortgage to cover my entire investment and profit (including the money I give to the contractor, my repair costs, holding costs, etc.).
When the work is done, the owner/contractor can’t cut me out…I have a second mortgage recorded. Seasoning is not an issue…he’s been on title for years. I get my profit (and all expenses) reimbursed directly on a HUD-1 as a mortgage payoff. (I can readily argue that I am, in effect, lending him the money for the repairs, etc. and I’m the one who specifies what the cost of repairs was.)
What do you think? Wouldn’t this work? How can I do this better?