How Soon Can I Sell a House that I am Building? Waiting Period?

Question

I was able to make a deal with a builder with that was leaving the area and liquidating their remaining lots. I am building a house through them, from the ground up, for about $30k less than anything else in the area.
I am planning on flipping this property and I was wondering if anyone knew how long I had to wait, after closing, before I can list it for sale? and how long I have to wait before I can actually sell it?
I have heard that I might have to wait 90 days but I was wondering what rule/law this was that required me to do so? Or if I can list it as soon as I close?
I am in the Austin, TX area. Any insight would be much appreciated!
-Ryan

Mark Saenz · Answer

Hey Ryan (fellow Texan)! You may want to look at your paperwork and make sure you didn't sign an affidavit saying you couldn't sell for a year etc. I know when I was buying in Cali...people were flipping new homes and banking big...the builders got wise and started making them sign affidavits because then you start competing with the builder for sales. I'm with J. Scott on this....start marketing and get to selling! I get a ton of buyers that are looking to buy now, but for 3 months out etc. Good luck!

J Scott · Answer

You can list it as soon as you close, but the bigger question is when will a buyer be able to get financing for it. If the buyer is FHA, and assuming the house is built and will pass an FHA inspection, he should be able to get financing immediately, though not all FHA lenders will do this. Some FHA lenders will require that you're on title for 90 days before they lend to someone buying the property from you. That said, I imagine it will probably take close to that to build a house from the ground up. For a conventional owner-occupied loan, I don't believe there is any seasoning, and you should be able to sell as soon as you own the property. Again, the big issue is the buyer's lender, and what their rules are...

Chris Clothier · Answer

Ryan - I don't think this pertains to the legality of selling the house right now as you have it under contract and can legally sell it as long as you did not sign the dealers intention form. My question, is how much of the neigborhood is completed and why is the builder vacating and liquidating? When you say liquidating, is he selling to other builders or completing the neighborhood. I only ask because many investors have been hung with properties in neighborhoods that are unfinished and they cannot sell. That happened to several investors I network with in Florida and Alabama. In any case, if you are looking to sell and the builder is still marketing the other properties, it could be hard for you to sell. You would probably want to get to marketing as Mark said! Best of luck with your investing, Chris

Mark Saenz · Answer

Smart move not signing the affidavit! I'd start marketing privately (meaning nothing in front of the house). Just remember, you are competing with the builder if they are still trying to sell...so keep mindful of that....you don't want him/her all pissed off at you and then it's hard toget things done at your house. But if you're offering a good deal, and someone is afraid to lose it, you can get a contract early...even before it's completed. Just something to think about.

Jackie Pyle · Answer

Ryan, I don't understand the 12 that are sold at "right over 155K". Were they pre-sold by the builder? Any how be careful because if they sold turn key at 155k when you get yours under contract with a buyer you may have a problem with the buyers appraisal for the bank. 12 comps in the same neighborhood at that price would bring the price of yours down for sure.

Ryan Ohendalski · Answer

Chris- This was actually my main concern: That I would be competing against other builders and be stuck with the property. The easiest way to explain it is that builders A, B, and C were all in a development. Builder C has left the entire Austin area as a whole and sold all their remaining lots to Builder D (through a sweetheart deal due to because the sales managers for both C and D are married). The cheapest home available to be built through builders A and B is right at 200k. I was able to build with Builder D (who is building on the 12 lots it purchased and that is it,.. all of which are already sold) for right over 155k. I am hoping to sell QUICKLY for around 190 and be done with it... I think that it will go fast based on the comps,.. but the good thing is that I still have a decent margin to work with and lower the price if it doesn't sell quickly. Any other advice or concerns are welcomed!

Ryan Ohendalski · Answer

Thank you both for the information. The builder did have a form that stated that I was intending to live in the house for at least a year, however, I did not sign it and told them I would not buy if I was forced to sign it since I was planning on flipping it. And it does take about 90 days to build the house, but the title does not go into my name until the house in finished. But that is great info that the 90 days rule is more than likely for an FHA loan and a conventional loan should be able to be sold right away. The framing on the house was just finished so I am just trying to make sure what I can and can't do before it is completed.

J Scott · Answer

Oh yeah, Mark brings up a great point that I missed... Ensure there was nothing in your purchase contract that would forbid you from reselling for some period of time... Thanks for the correction, Mark!