Posted by Jonathan Rexford on July 31, 2005 at 06:06:38:
Tommy,
The contract would be between the Seller and the End investor. You would do a release fee at closing. The problem with assignments is that even those are being questions by some bone head underwriter.
Seasoning and Flipping - Posted by Stephanie
Posted by Stephanie on July 30, 2005 at 05:32:56:
This is going to be somewhat long so bear with me!
From many of the real estate books that I have read seasoning seems to be a huge issue for the flippers out there.
Here is a scenario, lets say that I have a nice piece of property under contract for lets say 10k below FMV. I won’t have to do a thing to the property, just flip it. I want to flip it to a couple that is using traditional lending and here of course is the seasoning issue. Could I do this…
The investor signs a contract with the seller to purchase their property 10k under FMV.
Create a Land Trust with the seller’s name. “Smith Family Trust”
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)
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”.)
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.
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.
The closing agent delivers the funds to the owner for the purchase price, the difference to the dealer.
I am looking for any flaws in the “Master Plan”. Any comments appreciated!
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:
ANSWER: Going to be hard to find an investor to buy a home with that small of spread.
ANSWER: Lenders are wise of the trust these days. Because of some of the Fraud that has gone on with run ups in price.
ANSWER: May work. Without the above if more money was in the deal. There are easier ways to do this.
ANSWER: Lender will look at the title and say hmmm what is going on here (its happened to me).
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.
ANSWER OK
AMSWER: okay…same as above
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.
Re: Seasoning and Flipping - Posted by Stephanie
Posted by Stephanie on August 01, 2005 at 07:30:48:
Yeah it does sound good on paper, I think that I have to stick with the KISS method (keep it simple stupid). Thanks for the great feedback Jonathan.
There is no due on sale jail? - Posted by Paul Strauss
Posted by Paul Strauss on July 30, 2005 at 19:53:24:
Some methods of “flipping” are fraud. Others can cause the lender to accelerate the loan-- and please don’t believe the stories that this can’t happen. I personally know of an investor that had 5 loans called by Washington Mutual.
Still-- in IL, if they accelerate, you’ll have 45 days to assume the loan or refinance. Then it’ll take them another three to four months after that to actually foreclose.
So, are there “ways around” this? Yes.
But, IMHO, not for long. I see flipping as we know it changing greatly-- hurting homeowners, and beginning investors.
Re: Seasoning and Flipping - Posted by Tommy
Posted by Tommy on July 30, 2005 at 18:13:54:
“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.”
Jonathan, if the contract is released by the investor with the seller, wouldn’t the new contract be with the new investor and the seller instead of investor to investor? Would an assignment work in a situation like this?