Posted by George on April 30, 2000 at 21:34:27:
The banks have a legitimate fear. There are cases where houses are flipped with the intention of increasing the mortgaged amount and then skipping town with the mortgage money leaving the bank to foreclose on a worthless house. Mandatory appraisals probably reduce the risk, but do not eliminate it.
“flipping hysteria” almost did my deal in…saved by a good Mortgage Broker - Posted by Bob-MD
Posted by Bob-MD on April 21, 2000 at 19:47:03:
I was just a few days away from closing (selling) on a rehab project that I had completed when the buyer’s bank realized that I had not owned the house for a year and said that they would not fund the deal for the buyer because it is the bank’s policy because of all the flipping problems. Fortunately I had referred my buyers to a good mortgage broker for their funding and he immediately placed the loan with another lender that did not suffer from such paranoia about flipping. This just confirms what Ed Garcia has been preaching…that a good mortgage broker is worth his weight in gold. I’m a believer!! My buyers had way less than perfect credit and he was able to find lenders to fund the deal with almost nothing down.
Bob
A rose by any other name… - Posted by Eric C
Posted by Eric C on April 26, 2000 at 01:39:21:
Hi all -
Restrictions on the practice of “flipping” are becoming more common among many in the lending community. This is not a new trend and although I don’t like it, I still have to live with the consequences (for now).
I don’t “flip” properties. I purchase at “wholesale” and move them at “retail.” Every banker and institution I’ve ever dealt with has come to the conclusion that this is sound business and a robust business model.
Here’s the strategy I use -
Don’t use buzzwords for your business. Call it something that the banks already know and understand well. Just be sure to associate yourself with something “good” (in the banker’s eyes) as opposed to the aforementioned nasty “flipping” practices.
Write a take-out agreement into your purchase contract. I always put wording into the contract that requires the lender to make good financing available to my end-user. Sure, they always balk. But, most of the time I get them to agree to provide funding to my buyers under reasonable conditions. If they don’t, then I use their reluctance to further hammer them about the price and terms under which I will solve their immediate problem (purchase the REO or whatever).
Contrary to what many will tell you - banks expect to lose money on some deals – just not too much, nor too often. What they are far more concerned with is the prospect of looking foolish. They have this trait in common with most gov’t agencies and institutions, but that’s another story.
Yours,
Eric C
PS - and I really like Jim Piper’s idea too.
Re: “flipping hysteria” almost did my deal in…saved by a good Mortgage Broker - Posted by Trump
Posted by Trump on April 24, 2000 at 16:18:19:
If you ever have this problem on a RETAIL deal, you just need to show the lender your repair recepts. Now>>>>. ( I usually charge for this advise) If you have this problem on a lease option…simply list your
Re: “flipping hysteria” - Posted by JPiper
Posted by JPiper on April 22, 2000 at 18:55:23:
Bob:
Just a few comments.
First, in my opinion, your broker should have known this PRIOR to taking the loan to this lender. It?s gratifying that he recovered quickly, and got the deal done. But had he known his lender the way he should have, you and he might not have been exposed to this problem to begin with. From your perspective I think it?s important that you understand this is a growing problem, that of owner seasoning, and that you should discuss the lender with your broker regarding the issue before he takes the borrower there. I personally don?t trust that brokers have carefully looked at this issue in much detail for each of the lenders that they deal with.
Second, this issue of owner seasoning is one that I think we need to start battling with. It?s completely nonsensical in my view. I bail a lender out on their REO that has been trashed, pay cash for their problem. Then I fix it up, do the community a service, the lender a service, and provide the buyer with a good house that has been repaired into excellent condition. Now the lender wants to stiff me by saying that I haven?t owned it long enough???
Don?t know about you, but this attitude p*sses me off royally! I think it?s time that lenders should start to get some feedback from their customers! I understand why the rule exists. They?ve managed to get themselves fooled by some less than ethical investors. But let?s face it?.making a blanket rule of no financing if the owner has owned it less than a year is completely nonsensical. I have no problem with a lender verifying my repairs. I think they should verify the market value of the property carefully. But don?t tell me that assuming they have verified the above, that DESPITE that I haven?t owned the property long enough. Not when I bailed out one of their lousy loans to begin with.
My attitude is that the mortgage broker needs to give them some feedback. I think it should go something like this: ?THE IDEA OF A BLANKET POLICY ON OWNER SEASONING IS STUPID. MY CLIENT HAS REPAIRED A HOUSE. THAT CAN BE VERIFIED. THE HOUSE COMPS OUT. THAT CAN BE VERIFIED AS WELL. WE AREN?T GOING TO DO ANYMORE LOANS OF ANY TYPE WITH YOU UNTIL YOU START TO LOOK AT THESE DEALS INDIVIDUALLY AND LOGICALLY. WE AREN?T WILLING TO LISTEN TO YOUR STUPID IDEA OF A BLANKET POLICY CONCERNING THIS ISSUE?AND IF IT CONTINUES YOU WILL GET NO BUSINESS FROM US. BY THE WAY, WE JUST PUT THIS LOAN DOWN WITH XXX MORTGAGE?AND FROM NOW ON THEY WILL BE GETTING OUR BUSINESS.?
I think if a few mortgage brokers actually grow some cajones, and step forward with a strong stance and a logical point of view?.perhaps this situation will begin to change. And I believe that we investors should encourage our brokers to educate their lenders, encourage them to express their viewpoint to someone in a position to make a difference.
Hope you don?t mind me expressing my viewpoint in response to your post. It seemed like a logical place to do so.
JPiper
I know how you feel - Posted by Mike Kimbrough
Posted by Mike Kimbrough on April 22, 2000 at 11:59:39:
Week before last on thursday, Countrywide did the same thing to me. We were supposed to close Friday. Turned the buyers to my mortgage guy and we closed this past Wed.
Mike
Re: “flipping hysteria” almost did my deal in…saved by a good Mortgage Broker - Posted by SCook85
Posted by SCook85 on April 22, 2000 at 10:01:31:
Bob,
If you could let me know who it was as well I would greatly appreciate it. We just had 2 go bust in the last couple of weeks for the same reason.
Steve
Re: “flipping hysteria” - Posted by Bob-MD
Posted by Bob-MD on April 29, 2000 at 20:34:26:
Thanks for the response. Something does need to be done about these lenders that don’t use common sense to make their lending decisions. I found out the name of the lender and am going to get the name of the president and write him a letter along the lines that you suggested. I know that there are several lenders around that now have the same seasoning policy. I guess they think they can get away with it now when business is brisk and they are fat but times will change and we will not use them when they loosen up their policies and seek our investing business.
Bob-MD
Re: “flipping hysteria” - Posted by GregNorman
Posted by GregNorman on April 25, 2000 at 12:25:25:
Cajones… I haven’t heard that one in a while!
I agree 100% w/ this post!
I think I’ll print this post out and keep it on file to hand to a mortgage broker when needed.
GregNorman
Re: “flipping hysteria” - Posted by Warner(ATL)
Posted by Warner(ATL) on April 23, 2000 at 18:45:58:
I truly feel that banks do not know how to do proper due diligence on a “flipped” property in a way that it is cost efficient to them, and that they seriously need help from those in the investment community to show them how. If they can be shown through a series of articles in a major trade publication, or a industry wide report, seminar or something…how they can efficiently check the values of any property they lend on AND how much business they are losing as a result, they may begin to change their minds. The banks are like some sellers we deal with on an individual basis who are confused by our creative methods, if they do not understand, they will always say no.
Re: “flipping hysteria” - Posted by Bill K. (AZ)
Posted by Bill K. (AZ) on April 22, 2000 at 20:48:44:
Jim,
I feel the same way. We help the lender take a “nonperforming asset” off of their books, and that’s the thanks a legitimate investor gets. I’m already expressing this sentiment to the mortgage brokers I’m involved with, but it will take some time to turn this ship around. Finally, as long as there are some lenders who DON’T implement such a ridiculous, blanket policy, many, if not all, of the investor loans will be going their way. That should show up on somebody’s bottom line as well.
Bill K. (AZ)
Re: “flipping hysteria” - Posted by Bob-MD
Posted by Bob-MD on April 26, 2000 at 16:54:22:
Steve:
I found out from the mortgage broker that the bank that kicked the mortgage back at the last minute is First Franklin. I am going to find out the bank president’s name and write him a letter along the lines of Piper’s reply. The mortgage broker I am using is Tyre Jay at Harford Financial Group in Harford County. His phone # is 410-838-6280. They work hard and are creative. I think we all need to get together and do something to combat this spreading problem of lenders refusing to lend on “unseasoned houses”.
Bob-MD