Seasoning Issues with Simultaneous Closings - WHAT NOW!

One thing that I do is put everything on paper. My offer comes with bunch of clause. One of them being that if I want to assign -- I can, if I want to sell within a week from when I bought it from -- I can. If it doesn't get accepted, I move on.

There are different ways to do the double closing and all. Your title company can help you with that, granted they know what they are doing. My title company told me that they will take care of everything and I should not worry about it... I will ask them for more details of how they get around it and will let you know.

Yuri

Hi guys, this is what i have read regarding investors doing a-b b-c short sale same day transactions ...
The latest approval and release documents from Fannie stated a condition that prohibits a second transaction on the same property for 30 days. Freddie stated that they are moving to do similarly. Since the government now owns those entities, it is the current administration that is moving to try to stop double closings.
However, our government often does things without thinking through the ramifications. The bailouts actually encouraged less approvals for short sales and more foreclosures. Now they are have been trying to reverse this effect.
Since Fannie/Freddie own about 65% of the loans, what they do will effect the entire system.
The reason that they are trying to stop double closings is because they believe that you investors are making money at their expense. That certainly is true, but you are also mitigating their losses. Government entities just do not like individuals making money that they think should be theirs.
There is a legal issue involved with this prohibition though. Title companies may refuse to close with this condition, or they may just ignore the condition and close on the second sale anyway. If you use another title company, they would not know about the prohibition.
A problem, though, could arise if you do a double closing. If you violate the prohibition, AND if the lender has accepted the wire transfer so that the transaction is complete AS TO THE LENDER (secondary market investor), what is the effect of the lender REVOKING their approval. This is what we will be watching. They may not be able to revoke their approval legally. They may not have a valid lawsuit against the parties, notwithstanding the breach of that one element. They may not really have any damages. They could actually create a legal liability for themselves by prohibiting the second closing.
I will continue to watch this. However, not all SMI's have this prohibition, and by the time any of your proposals come to fruition, the issues may be resolved.
I hope this has been helpful. Any comments or feed back on how to circumvent this is always appreciated.
Mati

Yuri,
Could you please elaborate a bit more on your success doing double closings:
What types of properties are you locking up: REO, Short Sales, FSBO...
What contracts are you using: Purchase and Sale, Option ...
Please post your clauses (wording)
Which title company do you use?
Please let me know how they are getting around the "seasoning" issue.
Thanks,
mati

I am looking to find out from you what strategies you are using when attempting to get a short sale prop under contract and then flip it to an end buyer via back 2 back closing, complying with the seasoning requirements that the banks have?

From what I understand is that simultanoeus closings and double closing are different. The simultaneous closing is wher you tie up the property and do a closing with hopes to close with your investor to pay for the first closing which is why It might be considered illegal or whatever. Because what happens if your investor backs ou the deal and you cant pay for the property to close out fully. You have a problem. The double closing is where you buy the property out right and the sell the property againg right after to your investor. So you buy then he buys. Nobody is at risk of not getting accept you if your investor backs out, and if this happens you find another buyer to sell. People often describe these 2 as the same. They are not. Double closings are amore solid and the original buyer is not being jerked around because he gets his money up front. So this may be why bank dont simultaneous closings. But double closings they get paid. So you should and can sell to whoever you chosse to once you have paid for the property because its yours. I ahve been told that banks will try to control what you do with the property, but you must not tolerate it and fight back in what you will accept and make part of negotiations. Think aabout if you bought a pair of sneakers and wanted to sell it to me for 30 bucks more than you paid for it, and I was willing to pay your price, you can do that. Nike is no longer part of the deal. There deal got closed when you bought and paid them there funds for the sneakers.Be carfeul using these terms interchangably.

This double closing Seasoning issue is the biggest obstacle to my momentum right now. Accepted offers for REO's die quickly with sellers addendums blocking assignments and directing escrow to sellers title company, whom has instructions specifically not to double close. I am not attempting to follow through against these addendums as loosing earnest money or even the delay in its refund is a deterent.

We are not just seeing a problem attempting to located a title agency that will perform a double closing these days, or trying to get the REO selling party to accept us using our own title agency for closing ... where the problem lies is that if your end buyer is going to purchase a house with a conventional or FHA loan, there are now seasoning requirements that we must hold the title to these homes for a minimum of 90 days before we can flip these homes. Some lenders require more seasoning time. How are you all overcoming this requirement when looking to flip a home where the end buyer is requiring financing?
Please give feedback.

You're needing to find that Realtor whose willing to pay Game right along with you. I ask my RE agent today, outright, whether he was afraid to submit low ball offers to these banks. If he answered, "No way" or something similar, I'd said "NEXT" like HUD Lady does on "The PJ's" with Thurgood. Down here in Atlanta, sellers (Lenders) are wanting mad $$$ for these houses were repairs exceed the Asking (List) price of the house. I refuse, you hear me, to overpay for crappy house. It really wouldn't make a bit of difference whether you're buyer used Lender's title company because their title companies don't do double closing.

Would an attorney be better off handling the simultaneous closing or double closing for your transaction? How is anyone enforcing the Lender to use your chosen attorney or title company to conduct the closing? How could anyone (if they can) penalize the lender for delaying the closing after they've accept your offer & agree upon a closing date?

I am coming across this too when the end buyer has a FHA loan. My double-closing in May worked out because my end buyer had an in-house loan through a local bank. It's true that FHA will not give a loan for a house that has been purchased within the last 90 days (might even be 6 months). Also, they will not allow the investor to make more than 10% above their purchase price+cost of repairs/improvements. It really stinks because it eliminates the people qualifying now for FHA loans from buying your discounted property. So much for trying to help the little guy. There are also restrictions on how many properties you can sell in a year (5) before you are considered a "dealer" and have other ramifications (this is where land trusts come in, not using your name)
I have found assignments to be even more important now, as a strategy, because this does not require seasoning. You are just selling a contract. You can do as many of these as you want., and as fast as you want. And yes they have their own set of hurdles, such as getting an REO bank to accept the assignment. BUT, like others have said, just stick to it and you will make it work, one way or another.

one more note: If you hold a property for a year, there are no restrictions to your selling. Buy & hold (in my opinion)is indeed one of the best strategies for many different reasons.

Thanks for all the info!

Best of luck to all!!

Rina

Typically if the repairs exceed $5000; FHA doesn't insure the loan but it may be eligibe for 203(k) loan.

SCARES THIS NEWBIE TO DEATH. LOL.... I MEAN REALLY

what's confusing you?