FHA Concern

[Account Closed]

Hello, everyone. Well, I've discussed with a potential buyer that I'll be doing a double closing, meaning the A-B settlement, then the B-C settlement. I told him that I'll close with the seller first using private funds, then close with him. I also told him that I'd prefer that he uses my title company. He said he's a cash buyer, but his concern is when he rehabs and resells the property that FHA funding for his buyer would be difficult because it will be revealed that the deed was transferred to me then to him during the double close. Mind you, he's not obtaining FHA funding, but he says that most likely his end buyer will after he fixes up the place. Am I baffling anyone? Well, I'm quite confused as I don't see why my flipping a property to him would give his end buyer difficulty with obtaining financing after he rehabs the house, which will take about 2.5 months. In addition, he suggested that he enters a purchase agreement with the seller, my relative, voiding my contract with her, then he'll cut a check to me reflecting the proceeds.

Feedback???

[Scott Hubbard]

Nicole-

The investor has a legitimate concern and FHA can call into question the chain of title and even disapprove funding should they see fit. FHA underwriters are under extreme scrutiny as fraud has been rampant during the least several years. This could cause your end buyer to carry the property longer in order to season the title.

Personally, if FHA buyers were a large segment of the target market, I would also insist you not be in the chain of title.

I see three legitimate options for you.

1. Perform and hold the property yourself for twelve months. Perhaps you can get a renter in there to help with carrying costs.

2. Perform and do the rehab yourself.

3. Assign the contract instead. You can still have your end-buyer pay the liens too.

There are some other options like revocable living trust or putting it in an LLC, but it is sound advice to have these entities drawn up and recorded using an attorney and this can get very expensive. If I were your end-buyer, I might not bother with all of this red-tape.

Talk to your end-buyer to see what you can work out.