Posted by Redline on November 26, 2000 at 16:28:57:
And this is why I was confused from the beginning … you still have seasoning problems that require some sort of “more than creative” solution.
RL
Questions about legalities of flipping… - Posted by Charity
Posted by Charity on November 22, 2000 at 20:29:50:
I was reading some of the posts further down about mtg companies not wanting to lend when the title is not seasoned. Can someone explain this and how to get around it? I have found that getting straight options is fairly easy in my market, and I am also interested in doing L/Os (the sandwich type) I have had no luck as of yet with subject-to. How can one get around these problems with seasoning and still do options and L/Os nowadays?
Charity
Legality vs. Underwriting Criteria - Posted by Max W. (VA)
Posted by Max W. (VA) on November 23, 2000 at 08:29:46:
“Flipping” in itself is absolutely 100% LEGAL. It is done everyday in almost every (non-service)industry I can think of as wholesale-retail business. Please don’t confuse lenders underwriting criteria with legality. Fraud by some investors have many lenders scared of unseasoned property. I have encountered this problem lately and have discovered that different lenders have very different policies regarding property seasoning. Consider locating a GOOD mortgage broker that will do some research and find a lender that is not concerned with property seasoning or has more liberal policies. Once you find a potential buyer you can refer them to this broker. Happy Holidays
Re: Questions about legalities of flipping… - Posted by Marty Weisberg
Posted by Marty Weisberg on November 23, 2000 at 08:08:14:
Charity,
You are right. More and more lenders are looking at seasoning. Not only of financing but also of title.
One way to get around this and still give you all of the flexibility you need to structure a deal the way you want, is to have the Seller put the property into a land trust BEFORE you buy it. Then have them name you as a beneficiary of the trust. Now you will be able to flip it, L/O or any other form of creative real estate that you choose.
Marty
Re: Questions about legalities of flipping… - Posted by TC
Posted by TC on November 22, 2000 at 20:54:23:
Hi Charity.
One of my first deals was a straight option.I exercised about 60 days later and did a double closing.I had no problems what so ever.
I have a good Title Company that understands options,double closings and trust’s ect.If you can find a good one I beleive that they can help smooth this process with even the mortgage co.
Hmmm … question re: seasoning - Posted by Redline
Posted by Redline on November 25, 2000 at 23:43:32:
Ok hold a sec, now I’m a little confused.
By acquiring the property via a trust like this, you’ve completely avoided title and mortgage seasoning issues? If this is true, why do so many people make such a big deal about the fact that seasoning is ruining many deals?
RL
Re: Hmmm … question re: seasoning - Posted by Marty Weisberg
Posted by Marty Weisberg on November 26, 2000 at 08:40:28:
Let us say that Joe Smith owns a property and you want to buy his property. You have him sign the property over to you in any manner , whether it be subject to (using a land trust or not) or if you are trying to buy the property putting new financing on it. In either case there is a new owner on the property and the lenders treat it as a new property to the buyer.
Now let’s say that before you transfer title to yourself you have the Seller place the property into a land trust and have him/her make you a beneficiary of that trust. Whether you then apply for a loan to purchase it in your name or if you want to flip it to a new buyer, the bank sees the title in the name of the Seller’s trust. Whatever his/her holding period was will be what the lender uses for seasoning purposes.
Most people skip the step of having the Seller place the property into a land trust. By doing that they would alleviate the title seasoning issue.
I hope this clears it up for you.
Marty
Re: Hmmm … question re: seasoning - Posted by JPiper
Posted by JPiper on November 26, 2000 at 13:37:06:
I had a hard time following your reasoning here.
Deeding to a trust changes ownership…therefore seemingly falling directly into the owner seasoning issue (assuming it is held this way for under 12 months)…especially if the beneficial interest in the trust is someone different than the seller.
What did I miss in this scenario?
JPiper
Re: Hmmm … question re: seasoning - Posted by Houserookie
Posted by Houserookie on November 26, 2000 at 10:43:14:
Great thought Marty…
One more reason to use land trust …
: )
Re: Hmmm … question re: seasoning - Posted by Marty Weisberg
Posted by Marty Weisberg on November 26, 2000 at 14:02:57:
The reasoning is this:
When the Seller puts the property into their land trust, with themselves as beneficiary, there is no change in ownership from the lender’s perspective. The subsequent assignment of beneficial interest is not a recorded or public document. From the bank’s perspective it is still the same owner.
Marty
Re: Hmmm … question re: seasoning - Posted by JPiper
Posted by JPiper on November 26, 2000 at 15:01:08:
I understand this reasoning of course. However, both seller and buyer will need to sign documents that in essence state that there are no “side agreements”. Certainly, an unrecorded assignment of beneficial interest would be one of those.
Unless there is more to it, it would seem that in order to accomplish what you have suggested would require deceiving the lender…no different for example than a side agreement regarding a “silent second” or an agreement passing funds outside of escrow.
Again, perhaps I’m overlooking some type of detail.
JPiper