Posted by Frank Chin on February 11, 2002 at 07:19:01:
Hi Clair:
This is a bank financing, not a legal issue. What is the BIG DEAL you ask??
Some lenders (not all) now require sellers of property to have title for at least 12 months, or 12 months seasoning, before they’ll give your buyer a loan. So what’s the problem with that??
You see a ton of flipping questions on this board. Flippers buy a place from distressed owners, hoping to to paint and clean the place, and resell it quickly for much more, within a few weeks time. Ideally, they can have everything wrapped up and turned around and sold in 30 to 60 days, to someone who can get a mortgage and close on it.
So how can they do that if there’s 12 months seasoning required. Is the flipper going to sit on the place for 12 months so it would be seasoned??
These rules were put in place to prevent flipping scams that’s been going on where flippers in collusion with crooked appraisers giving highly inflated appraisals, would then sell worthless property to marginal buyers. Often the scammers would help the unqualifed buyers lie on the loan application to get mortgages they know the buyers cannot afford to pay.
The end result is the flipper pockets the proceeds, and the bank gets stuck with an unpaid loan plus the worthless property when the buyer defaults.
Because scammers are in it for the quick buck and little work, hopefully the seasoning rule will slow them down a bit.
Frank Chin