title seasoning

[starkey]

first thanks for the help on posting a new thread.
iam in texas and have on and off bought sold and built property since 1989.i would like to start doing more quik flips (rehabs,reos,owner finance,simoclosing type deals).in the past 12 months i have built 3 houses. and bought one quick filp. the quick flip is set to close 08/30/06. all appears well. how ever i keep hearing horo stories about title seasoning issues.the stories are you have to own a property for 6 to 12 months before the title company, appraiser,will get you through the red tape. does any body have experice with this and or ideals on how to get around this problem.

thanks
starkey

[Burke]

Starkey,

Unfortunately, I don't have answers to your questions but I am curious where you are in Texas.

Thanks,

Burke

[Aldo]

I have no experience with this, but I know many states are enacting laws to bring flipping under control due to the huge amount of fraud during the now-dying seller's market. 12 months is the number I'm usually hearing, but that may be a local thing.

[starkey]

burke
im in victoria texas which is half way between houston and corpus christi
have lived around san antonio most of my life. been in victoria about 18 months.not new to real estate or building or rehab flipping but am new to making real money. worked hard most my life for peanuts.tired want to use brain instead of back rest of my life. i have private money contacts and seem to allways make them more money than i do.texas is one of the few states that has affodale real estate and building cost but differnent real estate laws than most states.lots to learn on flipping and owner finnacing etc. how ever 10% return on rentals and notes is easy to get plus appercaition.lots of deals here but you gotta know how to work the system







5

[starkey]

aldo
texas is and i think will remain a safe market we have never seen a inflation on real estate like most major cities. when you can buy lower than a builder can build i think its safe. but fliping is tough and getting harder.

[Jim FL]

first thanks for the help on posting a new thread.
iam in texas and have on and off bought sold and built property since 1989.i would like to start doing more quik flips (rehabs,reos,owner finance,simoclosing type deals).in the past 12 months i have built 3 houses. and bought one quick filp. the quick flip is set to close 08/30/06. all appears well. how ever i keep hearing horo stories about title seasoning issues.the stories are you have to own a property for 6 to 12 months before the title company, appraiser,will get you through the red tape. does any body have experice with this and or ideals on how to get around this problem.

thanks
starkey

Starkey,
Title seasoning, ah, that wonderful thing that has crept up in the last few years.
As someone below stated, title seasoning started as an effort to curb predatory lending, and loan fraud.

Some folks, sadly, even some RE pro's, like agents, brokers, etc, seem to think that since FHA has instituted title seasoning requirements for the loans they fund, this is law.
It is not.

There are a number of lenders out there that do require the seller to hold title for a certain length of time, ranging from 3 months, to 12.
The less time on title, the lender may ask to see recpts etc, to show improvements made, to justify the sellers profit.
Seems silly to me, punishing folks for buying right.
I'm not sure how this really helps prevent loan fraud.

So, what's the answer for those of us who buy real estate for WELL below todays value, and sell quick after acquisition?
Simple really.........use lenders who do not have title seasoning requirements, they do still exist by the way.

For me, when I sell a property retail, either listed, or FSBO, I'll direct my buyers to get 'pre-qualified', with a mortgage broker I know, who has lenders without title seasoning issues.
When listed, if I've only owned a property for a short time, the listing comments will say, "no FHA".

Is title seasoning a pain?
Sure, but, not one that cannot be handled and overcome.

It also hurts double closes, and assignments, as most lenders with title seasoning requirements will not allow an assignment fee on the HUD-1, nor, will they allow you, as the investor, to take title for a few minutes, then sell to the end buyer, funded by them.
In this case, the solution is also rather simple.
When you tie a house up for a LOW price, and sell to someone else, double closing, just have one close.
Like this.......
Your seller, signs a new agreement with your buyer, for the price your buyer agreed to pay.
This transfers title from your seller, direct to your buyer, thus avoiding title seasoning.
How do you get paid?
By signing a release, for a price, allowing your seller to buy themselves out of your contract, and sell to the buyer you found. Your price for the release, is the difference between the purchase price agreed to with your seller, and the price your buyer is paying.

Does this make sense?

So, title seasoning, while becoming more common place than previous years, is not a law, but merely an underwriting requirement put in place by many lenders......mostly those backed by federal programs.

HTH,
Jim FL

[brianb_cobbres]

Like Jim said, it is not a law.


There are several ways to avoid or overcome seasoning issues if you are selling the house to another party. The banks seem to be more flexible when selling and much less when trying to refi if you are trying to take cash out.

Call lenders in your area and ask the if they will have seasoning issues. Put together a list of those with no seasoning requirments and provide to potential buyers.

Look into expresspath type financing where the lender already has done the appraisal the title work so you know there will not be any issues

Be prepared to justify the price increase from your purchase price and resale price. Pictures, receipts, etc....

Allow enough for carrying costs should it become an issue.

[landtrustwizard]

Keep it simple. Place the property in a NARS Simple Land Trust. Beneficiaries appoint their Trustee and deed him title. They then direct the Trustee to sell the property and distribute the proceeds as agreed. We have never had a question or problem from an escrow officer. The Trustee owns the property and the Trustee sells the property as in any other transaction.

Simple, Cheap, Fast, No Seasoning, Full Disclosure, No Double Closings, No Purchase of an Option, Private, Quiet, No Risk, No Cost to Investor, etc, etc, etc.

:SM038:

[starkey]

gary
iam just being mentored in trust. i have good friend who owns hundreds of properties each one is in its own single trust(i.e. 123 acme st land trust ). what im understanding is this makes all loans assumable is that correct?

1.how are insurace issues handled (home owners verse fire and ec) 2.if a seller is willing to do this how can they show future lenders there debit is covered ( qualify for a new mortage with the obligation of the house in trust). 3.if a investor takes control of a home through a trust. and has to give owner equity or spend a lot on rehab is he protected?

[landtrustwizard]

Hi Starkey,

Yes, because land trusts are exempt from the DOSC, in essence, it makes all loans assumable.

1. how are insurance issues handled (home owners verse fire and ec)?
Because the seller must remain a beneficiary for the life of the trust in order to comply with the DOSC, we just have the seller put us on as an additional insured. The incoming tenant must get renters insurance.

2. if a seller is willing to do this how can they show future lenders there debit is covered ( qualify for a new mortage with the obligation of the house in trust)? Because we use a NNN Lease, we have no exposure to maintenance and repairs or vacancies. Our Trustee writes a standard letter that we have used for years and it has been 100% effective thus far. Lenders do not ding your debt-to-income ratio.

3. if a investor takes control of a home through a trust and has to give owner equity or spend a lot on rehab is he protected? The answer is yes, but you never HAVE to do anything. I always tailor my deal to protect the seller's equity and to make it a WIN/WIN/WIN for each party.

I wish you the best of luck.

[Jim FL]

gary
iam just being mentored in trust. i have good friend who owns hundreds of properties each one is in its own single trust(i.e. 123 acme st land trust ). what im understanding is this makes all loans assumable is that correct? ?

REPLY:
No, the loan is NOT 'assumed' at all when you BUY subject to the existing financing using a simple land trust, without the hocus pocus of the wizardy method.
The TITLE, of the property, (ownership), changes hands, but the loan remains in the sellers name, and on their credit report........whether you use my method, or others.


1.how are insurace issues handled (home owners verse fire and ec) ?

REPLY:
While some folks claim to simply 'switch' the insurance over, or 'add an additional insured' to the existing policy.........this is not real life, nor practical.
Why?
Because most folks you buy subject to from, have owner occupied policies in place.
The minute they leave the premises, that policy is no longer valid.
So, instead, cancel the old policy, and get a new one, naming your entity, or whoever/however you hold title as the insured and loss payee.
Not a big deal, and no point paying for two policies, as some others also suggest. (keep the sellers in place, and get a new one.....what a WASTE of money.)




2.if a seller is willing to do this how can they show future lenders there debit is covered ( qualify for a new mortage with the obligation of the house in trust). ?

REPLY:
There are a couple ways to handle this.
First, when you close the deal, the seller has a HUD-1 settlement sheet. This shows the transaction has closed, and many times is enough to show a new lender, that the DEBT is covered.
However, some lenders, this is not enough.
When that happens, most times, the lender needs to see proof that another party is making the payments on the old loan, and not the seller.
When a seller calls me with this issue, I simply have the new lender contact me direct, and see what they need. usually, it's just a letter on letterhead from me, explaining my company owns the property, and is making payments, then, a few months worth of checks to prove it.
Most times these hoops are not needed to jump thru, BUT, once in a while, they are.


3.if a investor takes control of a home through a trust. and has to give owner equity or spend a lot on rehab is he protected?

REPLY:
I'm not sure what you mean here, really?
Protected?
From what?
If you buy a house subject to, and promise to pay the seller LATER, rather than at close, some equity........that basically means the seller, gets a second/junior position to the original mortgage.
Whether you record that position with a mortgage, or deed of trust, is up to you and the seller.
For me, I usually just use a prom. note, and pay sellers some cash, when the property resells........and its a flat fee, not an amount that changes over time.
Much easier to manage that way.

No wizardry, or magic involved, just good old land trust law, and real estate principles.

HTH,
Jim FL

[landtrustwizard]

Starkey,

1. The loan of course remains in the seller's name. The difference is that you can take over the payments with a land trust and not violate the Due on Sale Clause. Traditional "subject to" transactions do violate the DOSC.

Subject To Financing: Traditional vs. Land Trust (http://www.goarticles.com/cgi-bin/showa.cgi?C=233788)

2. The previous poster doesn't understand land trusts. He said, "While some folks claim to simply 'switch' the insurance over, or 'add an additional insured' to the existing policy.........this is not real life, nor practical. Why? Because most folks you buy subject to from, have owner occupied policies in place. The minute they leave the premises, that policy is no longer valid.

He is right. IF you use a traditional "subject to". With a land trust, the owner retains ownership in the trust and the tenant is also an owner. The property is still owner occupied and, as I said, the owner need only add us as an additional insured. It's not only real life, we do it all the time. I'll be happy to put you in touch with a realtor/investor friend who has done it over 100 times.

3. My answer re your debt-to-income ratio stands and I'll be happy to put you in touch with my Trustee who will verify.

No wizardry and no sarcasm. Just a legal method that has been used since 1891. Good luck to you.

:scream:

[Jim FL]

Starkey,

1. The loan of course remains in the seller's name. The difference is that you can take over the payments with a land trust and not violate the Due on Sale Clause.

2. The previous poster doesn't understand land trusts. He said, "While some folks claim to simply 'switch' the insurance over, or 'add an additional insured' to the existing policy.........this is not real life, nor practical. Why? Because most folks you buy subject to from, have owner occupied policies in place. The minute they leave the premises, that policy is no longer valid.

With a land trust, the owner retains ownership in the trust and the tenant is also an owner. The property is still owner occupied and, as I said, the owner need only add us as an additional insured.

3. My answer re your debt-to-income ratio stands and I'll be happy to put you in touch with my Trustee who will verify.

No wizardry and no sarcasm. Just a legal method that has been used since 1891. Good luck to you.

:scream:

Regarding number two........ahh, sure, whatever you say there wiz!
STOP trying to push people into your system.........that's my real beef with you nars folks, push, push, BS, BS, oh, and if you fall for it, then, sure, nars will help set up your sub2 deal, there way........for a fee!
I was 100% right, and do know land trusts.
Then again, after 500 PLUS deals OF MY OWN, done subject to, you might be right......perhaps I just don't get it!


Bottom line, YOU ARE WRONG, and if you persist in spouting things like this, I'll make it my mission to rebut you EVERY chance I get.

Just because YOU keep telling folks to use your trust system, does not mean ALL folks using land trusts do........therefore, your statement of:

"With a land trust, the owner retains ownership in the trust and the tenant is also an owner. The property is still owner occupied and, as I said, the owner need only add us as an additional insured."

Ah, really.........alrighty then.

For those of us who use an illinois land trust, there has been PLENTY of case law, and past precedence......by the way, who, back in 1891 set up the first nars product, by whatever name it was called back then?
Oh, that's right, it did not exist back then.........QUIT misleading folks.


To Dan, I normally don't do things like this, but I'll tell ya, this wiz person keeps this up, and I'll certainly not return.

If people here want land trust education, perhaps we should have one of the lawyers in the house explain things.
This is also the same group that in the past, has blasted Bronchick, claiming he was wrong about trusts too.
(Yes, I remember reading the entire discussion/debate between Bronchick, Gatten, and some other seasoned investors regarding the malarky these folks spout.)

So Gary/Wiz,
Have a nice day! :smiley6:
Jim FL

[optionfl]

this thread needed to be closed

[Debbie]

Wiz, I'm not going to allow any more debates.


Optionfl, you are correct---I'm closing this thread.