Title Seasoning Problem - How To Avoid??
If you quickly (in less than 3 months) exercise your Option in a Lease/Option deal, how do you avoid a title seasoning issue with your buyer's lender?
I'm a couple days away from getting my first Lease/Option deal. My plan is to retail the house immediately (no lease period) to a home buyer that will qualify for a loan and purchase the home outright. I will have a purchase agreement to buy from the current owner. I will have a purchase agreement to sell to the retail home buyer.
1. When the home buyer gives a copy of the purchase agreement to his/her lender, won't the lender have a problem the I'm (the seller) not on the title to the house? How can I have an agreement to sell a house I don't own? (from the lender's perspective)
2. When I do a simultaneous closing (so that neither party knows my profit) won't it cause a title seasoning problem because the seller (me) in the second closing was only on title for a day (or less).
Please let me know how you get around or avoid this situation. I've read hundreds of posts on this site and haven't found this issue addressed. If you know where the answers to these questions are already posted, please direct me there.
Jamie
To avoid a seasoning issue, but more importantly the costs of double closing, why not assign your contract and collect your fee at closing. Your profit will be disclosed but so what.
thomasgsweat,
I'm concerned that assigning the contract and allowing the seller to see what's in it for me could cause the seller to baulk. They might feel that they agreed to too low of a price and demand more money from me. If that were to occur, I would have two options. Pay the additional funds to the seller to get them to move forward with the deal. Or sue them for not performing as agreed in the contract.
I realize this is likely to not be much of an issue with a very motivated seller, but this particular seller is only somewhat motivated.
Thanks for your advice. I would like to be able to avoid the above mentioned situation if possible. Ideally I would have the seller find out how much I made only by looking at the county records after the deal is done. Then it would be a mute point.
Jamie