WHAT THE "FLIP" IS GOING ON?!?!?!?!?! - Posted by Aaron Jackson

Posted by rob blake on February 02, 2000 at 02:39:33:

Look at it from the lender’s perspective. They make money by lending at a rate of return that is compromised if the loan is paid off quickly. In other words if I lend you money, even hard money, at say 1 point and 12% and you pay me off inside the first month of us closing on the loan…what did I make for my risk (as minimal as it is, there is still risk involved)? I made a lousy 1%, the 1 point I charged up front…no cash flows at all. You must structure deals with the approapriate money source and make it profitable for them as well. If I knew more the details I could answer your question better. Just remember, there is usually a way…if you know the financing. The time you spend learning how a lender makes his decisions is time well spent. As a mortgage lender by trade and investor by choice, it surprises me how many folks spend so much time working our the minute details or their “win-win” deals with sellers, but don’t give an ounce of thought how to make appealing to the money source they are using to close on the deal in the first place.

Kudos to you for getting this far…a little refinment and you are there.

PS: If I understand your deal, the lender stated they would lend you the 45K balance to payoff HUD, you would then own the property. You could then resell to your buyer who was going to put down 10%. Nothing wrong with that deal unless you have some reason for not wanting to be on title? You have no money in the deal, you get $7500 cash down and a 30K note with a payment stream you could sell for more cash or keep. Sounds like a winner to me.

I may not be seeing everything. One thing is for sure, if you are going to persue this, you need a good mortgage broker to go to bat for you. In most flip transactions, you don’t get the loan. You write the contract, tie up the property and then assign your contract to the your buyers (usually cash buyers…a 10%-15% discount off market brings them running) at closing. If you are trying to sell to someone needing financing, they have to get the money from a hard money source, not institutional lenders. They are not in the business you are in. They want to see everything, including 12 months seasoning…hard money just looks at loan to value.

WHAT THE “FLIP” IS GOING ON?!?!?!?!?! - Posted by Aaron Jackson

Posted by Aaron Jackson on February 01, 2000 at 22:51:24:

I have read Many Post on creonline about “FLIPPING”. I have been able to pull together a couple deals…and Now I see “FLIP” is a 4 letter word to Lenders. At first I thought Flipping was bad when the value of the house was not right, and the bank was left out in the cold when the propery wasn’t really worth what it appraised for…

Now i see that “FLIPPING” is something that is very bad to lenders all together. They want to see the seller on the Title for at least 1 year. WHat I don’t understand is…What does the credit of the borrower have to do with how long the Seller is on the title of the house, if the property appraises right. Here is my Personal experience…

I am in a contract with Hud for $45,000. The Property is worth $75,000. I have many comps. The house has new siding, new roof, remodeled in the inside. The owner lost it because they lost their job. The house doesn’t need much fix-up at all. I was suppose to do a simo closing. The Note buyer (wont mention their name). Was gonna pay 86% of the sale price. The Buyers credit was good. 4% carry back…and 10% Down. Now all of a sudden, the same day of the appraisel, the note buyer says that they can’t do it because the Seller has not been on the title yet. I thought that was the purpose of the Simo closing, The seller gets on the title then sells to the buyer, so they could be on the Title. Now they only want to pay the $45,000 to Hud, and the seller…me would carry the $30,000 second.

I guess what my question is…How do you structure a deal if your the investor, and your not on the title…THe LENDER wants to see you on the title for at least 1 year. How do you get around that? I am even willing to pay a year of Pre-payments if Seasoning is the issue. otherwise…ALL I see is someone trying to keep us investors from making money. Maybe I’m wrong, I am still a newbie, so let me shut up.

Re: What The “Flip” ($$$) - Posted by DMS

Posted by DMS on February 03, 2000 at 02:07:48:

Yes, we fund flips, w.a.c. Most importantly: No seasoning of ownership is required. Will provide more facts, if interested, email.

Re: WHAT THE “FLIP” IS GOING ON?!?!?!?!?! - Posted by Bill K. - FL

Posted by Bill K. - FL on February 02, 2000 at 09:27:22:

There are plenty of “note buyers/broker” out there. List your note for free on America’s Note Network and disclose it is a simultaneous closing and everything else about the deal. Then wait for your offers. Should have several in a couple of days. Do it today. Don’t cry over spilt milk, just go out and milk another cow.

Re: WHAT THE “FLIP” IS GOING ON? (long) - Posted by JoeB(Atlanta)

Posted by JoeB(Atlanta) on February 02, 2000 at 07:11:25:

Hi Aaron, I feel your pain, we’ve been there–done that. What is happening in the lending world is that many institutions have been burned by loan fraud due to investors flipping stuff and faking all the financials.

So many lenders have decided that: if the Seller (usually an investor like all of us) has not owned the property/been on title for awhile (ie about a year) AND if the Seller is selling the property for alot more than what he bought it for (ie 25% or more markup), THEN the flip must be wrong/ unethical/ fraudelent because there’s no way a Seller could have had any appreciation on the property in just 15-30 days.

BTW, everything I typed after THEN was me paraphrasing what the lenders (in Georgia) have been saying to us.

Unfortunately, this ignores 3 important facts:
1.Most of us investors are NOT unethical, fraudulent!
2.Many of us are good at finding good (way under value) deals, and this policy penalizes us because it assumes the seriously under-value deals are fraudulent!
3.Improving a property through the intelligent use of the least amount of renovation dollars can significantly raise the value (we’ve had the banks use the “flip fraud” line on us even when we sold AFTER doing an extensive rehab and we showed them the receipts).

My advice: keep looking for another lender for your Buyer and disclose up-front that you’re not on title, or ask your attorney (if he/she’s creative about flips) to recommend a lender.

Sorry about babbling on. Hope this helps,
Joe Brillante