Re: Seasoning and Flipping - Posted by Jonathan Rexford
Posted by Jonathan Rexford on July 30, 2005 at 06:58:46:
I will respond in order of questions:
- The investor signs a contract with the seller to purchase their property 10k under FMV.
ANSWER: Going to be hard to find an investor to buy a home with that small of spread.
- Create a Land Trust with the seller’s name. “Smith Family Trust”
ANSWER: Lenders are wise of the trust these days. Because of some of the Fraud that has gone on with run ups in price.
- Find the buyer - Investor and buyer sign a written contract where the buyer agrees to buy the property at a higher FMV price. (unkowing to the buyer of course)
ANSWER: May work. Without the above if more money was in the deal. There are easier ways to do this.
- Before closing, the seller deeds the property to the land trust. (When the buyer’s lender check the chain of title they will see the seller has been on title for years and recently transferred title to a trust, solving the “seasoning issue”.)
ANSWER: Lender will look at the title and say hmmm what is going on here (its happened to me).
- At closing the seller assigns his benificial interest in the trust to the investor and resigns as the trustee making the investor the sucessor trustee.
ANSWER: Works great on paper and in some circumstances but conventional lenders will not go with it on most occasions. If you go to a local lender they might.
- The new trustee (investor) signs a deed to the buyer from the “Smith Family Trust” at closing. This is deposited to escrow with the closing agent.
- The buyers sign all the bank loan documents at which time the transaction is complete.
AMSWER: okay…same as above
- The closing agent delivers the funds to the owner for the purchase price, the difference to the dealer.
ANSWER: All the above works great on paper. Ask yourself this question. Give lenders what they want. They want SEASONED title going from Seller to BUYER.
There are ways of doing this. Just make your deal up front with seller. Then go sell the deal. Then release your contract that you have with seller so the investor that you found can go into contract with investor and you get paid on the sellers side of the closing statement as a release fee.
Non of this Hocus Pocus.