How To Finance This Deal? $40k Profit ;possible
Numbers:
Price: $155,000
ARV: $200,000
Repairs: $5000
Whe know we can purchase the house thru traditional lending but I don't want to run into seasoning issues on the resale?
What else can we do?
The seller wants cash because she knows she's giving up a lot of equity.
First things first....I don't see $40k profit here. I see somewhere around $13k.
I'll show you how I have analyzed this deal:
Holding costs:
2 points on the loan $3100
8% interest for 6 months $6300
Property tax for 6 months $1530
$80/mo utilities for 6 months $320
Insurance $1020
Total holding $12270
Purch price $155,000
Plus holding $12270
Plus 7% realtor $14000
Plus repairs +10% $5500
TOTAL $186770
Sales price $200.000 minus $186,770 = $13230
As far as seasoning issues, you should direct your buyer to a good mortgage broker that can shop lenders that don't care about title seasoning.
Also if you take before and after pictures as well as receipts of all rehab work, this should satisfy many lenders with seasoning requirements.
We can subtract the realtor fee of $14,000 because I want use a realtor...
Marketing a house is the easy part.....
So, buying the property with traditional financing want block a resale with because of seasoning issues?
[ Edited by 205JUNKERScom on Date 09/04/2004 ]
Frankly it doesn't matter how you purchase the house you will always run into seasoning issues. It is your new buyer that will have the problem. Referring your buyers to your mortgage broker that understands the situation is the best advise I think anyone can give.
Quote:
On 2004-09-04 15:14, 205JUNKERScom wrote:
We can subtract the realtor fee of $14,000 because I want use a realtor...
So your time is worth nothing? Even if don't use one you should still pay your self. You will have marketing expenses. You will have a lot of time invested. This is time that you could use to generate income.
Then what if you can't sell it on your own and a realtor brings you a buyer?
Com'on, guys Junkers isn't asking if he should do the deal, he's asking whether his method of acquisition will affect the lenders when he gets ready to sell relative to the issue of seasoning. The answer? Not really.
Some lenders do not care about seasoning. Even the ones that do just want some explaination for why the house is worth $40,00 more than you paid for it. Buying it in a quick sale from a motivated seller is a good part of that explaination. Repairs are another good part. Document the first by including a fast close in your contract when you buy. Document the latter with photos and reciepts. If that isn't enough for the buyers bank then shop them to another lender.
lacashman,
I would pay a realtor $3000 for the realtor.
commercialking,
Thanks a lot, so you're saying I shouldn't worry about the seasoning but locate a really good mortgage broker?
205 Junkers, another thing you could do is utilize temporary owner financing, which bypasses any title seasoning issues that may arise, and enjoy a quicker resale and more control over your exit. At closing, you sell the note, and there are programs available that will allow you to enjoy minimal discounts, such as a note buyer purchasing that note from you at 94 cents on the dollar. This is a great program for rehabbers selling to owner occupants.
Hope this helps, Dave
davehays,
Do you have any recommendations?
I know this issue is kind of old, but what exactly is seasoning?? If you can guide me to a previous post that would be great. Thanks.
I am also somewhat fuzzy on the seasoning concept. While I DO understand what it is (the lender basically chickens out because the seller hasn't owned the property long enough), I DON'T understand why the lender would care... What if I bought a nice house for myself but the value has increased by $40k in a few short months (we have seen this happen in San Francisco Bay Area just this past summer) and I suddenly decided to sell and move to Alaska... The buyer can be turned down for financing because of that?
What is Seasoning? Is this when you buy a home finding it difficult to cash out when you refinance
Thanks
If you are in hot, moving market, banks will finance the property even if they realize that you owned the property for 2 months and you are selling it to make 40K. I recently did just this and not only that I had the buyer go through the same bank as I did for the mortgage. Just get a good broker and have him get a good appraiser.
Ciroma,
Seasoning refers to the amount of time in title. The seasoning requirements came about because of illegal flipping. As a result many lenders require 3, 6, or 12 months of ownership before they will fincance another purchase of that property, or refi with the same owner.
Junkers:
What commercial talking is saying is that you need to make sure when you go to sell the house, you steer the new buyers in the direction of a good mortgage broker that will submit the loan to a company that is more flexible with 'seasoning' issues.
You should also have good documentation of before and after pictures, receipts, etc....
One recommendation I have for you if you get a traditional loan, take a little higer interest rate and get a rebate from the lender to pay for some of your cost...
Best Regards,
Jeff Adam
[addsig]
Let's not get carried away with this "illegal flipping" paranoia...it has nothing to do with seasoning, okay. It has to do with fraudulent appraisals primarily, and making false statements on loan app's. Which no reliable broker will put up with anyway. I know many lenders in this business that could care less how long you have owned it, or the guy before you, and will give you 100% if you owner occupy, and 95% NonOwner. (Even stated income!) You just need an honest, liberal appraiser, and, yeah, it helps to document your repairs if you're shooting for top $ but then most of the time I don't even have to document them if they're not extensive. Decent credit helps, as does a little liquidity, but then you wouldn't be investing if you were on a shoestring budget usually.
Hope that helps. Feel free to PM me with any questions nationwide and good luck!.
WW