Example of a SS double close in CA?

Question

Ok, I have a hand full of short sale files on my desk.Clients already agreed a SS is the best solution. I would like to flip these to end buyers, but I want to make sure all ducks are in a row before it blows up in my face. My biggest concern is the number of days apart from the A-B and B-C closings. I have a couple lenders who will fund these.. Both lenders said they wont start to Underwrite the B-C end buyers file until new owner is on title. Which can take a couple days to update the pre-lim depending on how fast the title company is.

So lets say if A-B closes/records on Monday. Has to record with the county, then title can update the pre-lim to show new owner on title. Lets just say that comes in on Wednesday morning...give the updated pre-lim to end buyers lender to UW the file, wait 24 hours for approval, say on Thursday. Now assuming all Prior to Doc conditions are satisfied at time of Underwriting, which they almost never go straight to loan docs, there is usually another 24 hour wait for Loan Docs. So lets just assume it goes straight to docs...Docs come out on Friday, get signed/notorized at escrow on Friday afternoon. Escrow probably wont get to the file till Monday morning. Escrow then balances the file gets it ready to fund, overnights loan docs back to the lender. Tuesday morning, Lender checks the file in, issues any funding conditions on Tuesday afternoon. Assuming file is satisfied with all conditions, it's set to fund on Wednesday, record on Thursday. That about 11days between closings, of course assuming everything goes smoothly, which it almost never does, it could be longer. Loan officer, processor, and Underwriter must have all conditions in and hope for a smooth closing. Not too mention, if you're using transactional funding - what happens if they close the A-B and the loan blows up, or end buyer backs out? Transactional lender ends up with the property. Can someone please give an example and details of the timeline on their successful double closed transaction in CA. Maybe I need to find a lender that can at least Underwrite the end buyers file and push the updated pre-lim showing new owner on title as a DOC or Funding condition. Any lenders out there that can? Lets hear about your closings

Scott Hubbard · Answer

If you have the ability to hold the property for a minimum of three weeks, you can sell to FHA buyers. The pratical problem with FHA buyers are they are the most fickle. So, that three weeks could eaasily turn into six. Some properties and locations scream FHA. You might have to hold, but their certainly is risk. I would definetly not hold unless you can carry for three months. In my opinion, transactional funding is too expensive for FHA end-buyer's.

Scott Hubbard · Answer

Liam- Please share with all us your insights. Afterall, this is a public forum open to help investors succeed in REI. David- If your lenders are unwilling to underwrite until until B is on title, then continue to look. You need to avoid the big banks and mortgage brokers. Instead focus on Mortgage companies that actually fund their own deals and warehouses the paper until such time their are properly seasoned usually six months. After seasoning, they sell the paper in large pools to secondary markets. The Lending Company comes to mind. I am not sure if they operate in your market or not. Good Luck!

Aly W. · Answer

This is exactly the situation I'm in now. My short sale is in an area where all offers (and we've gotten quite a full, full asking price) are from FHA buyers. Only one may possibly qualify to go conventional. My B investor may need to use TF funding as well. I'm very glad to see this thread. Will, I may be dropping you a line :)

Scott Hubbard · Answer

It will likely show up on the prelim, but it does on give you the right to transfer title. It is simply a notice (announcement) that your a party to a sales contract.

David M. · Answer

So will the memorandum showing up on pre-lim allow the C buyers lender to Underwrite the file since I now have an interest in the property?

David M. · Answer

Good to know Will, I'll view your website. So you provided the TF... In reference to my above issue with C buyers lender not underwriting the loan until I'm on title or owner of record... will recording the option or memorandum with the county, show up on the pre-lim and give me the right to sell, so the loan can proceed?

Will Barnard · Answer

David, The lender was myself in some of those circumstances and some of the borrowers were BP members. Will

David M. · Answer

Scott, Excellent advice, I'll steer clear of the FHA buyer. Will, Thats good to know that it can and is being done here in CA. Are you able to refer the lender? I sent you a colleague request on a different note. Thanks guys for the advice, I'm in search of lenders that are familiar doing these types of transactions.

Will Barnard · Answer

Most all of the transactional funding deals I see happen with non FHA buyers here in CA. You are correct that many counties here in CA do not allow funding and recording on same day so doing a same day or 24 houor deal is out of the question. I have persoanl knowledge of investors who flipped SS's using TF here in CA and did so in 3 days, 2 days, and several more that took a few extra days. The key is to get yoru own lender (small lender who underwrites inhouse) and have your buyers apply thorugh them. This way, you have more control over the transaction and limit the problems, but do not eliminate them. If anything happens, you are ultimately responsible regardless of fault. (You signes the loan docs for the funding)

David M. · Answer

Liam, I sent you a colleague request, I'd like to hear how your SS is going. Please post as well, I'm sure everyone would like to see a real example in the making. Scott, Thanks for the reply, I'll continue looking. I'll check The Lending Company as well. What are your thoughts on FHA loans for end buyer? Is anyone currently using an FHA end buyer on your flip?