a purchase and sell question

General Real Estate Investing
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a purchase and sell question

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Member since 2008 · 24 posts · 0 votes

How long after a property is bought can you resell it?

I think it can be done the day after closing.

{IE} I buy it today I happen to have a buyer lined up he puts a contract on the property the next day and I can sell it when his bank approves the loan.

Highly unlikely but if its a cash buy as soon as I close, I can resell it?

Just curious since most of these TV show show people buying and selling supposedly within 30 days.

I know typically when you close on a house you have 30- 60 days, depending on what day in the month you close, before your 1st payment is due.

So what if you get lucky and sell it 2 weeks after you bought it? I'm assuming you don't have to wait till you get your 1st payment to resell it.

any help would be greatfully appreciated, thanks. :roll:

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  • Tom Wood
    Residential Real Estate Broker · St. Louis, MO · Member since 2008 · 254 posts · 5 votes
    19y

    There are some banks who may have a problem with a quick sale, but many times if the buyer has good credit you can find a lender who would do it.

    If you have a cash buyer there is no issue.

    Why close and resell right away? Why not assign your contract instead and save paying double closing fees?

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    OP
    Member since 2008 · 24 posts · 0 votes
    19y

    I have no clue what "assign your contract means" in real estate terms means.
    Can someone explain how you pull this off, sounds like a great idea. I particullarly like the saving the closing cost part. :mrgreen:

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  • Jim Slack
    Member since 2008 · 26 posts · 0 votes
    19y

    In Texas, they have started what they call "seasoning". This refers to purchasing a home w/ traditional or conventional financing (bank financing, 30 yr. fixed, etc.) These require a 3 months hold time or "seasoning". BUT, if you use H$ or cash to purchase a home, there is no "seasoning".

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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    19y

    Buying and selling can happen seconds apart. Some do deals like this. A double close is an example. I close in one room on the purchase and I close on the sale in the other room at effectively the same time. Legally there is an order as I can not legally sell until I have finished buying. One is recorded before the other.

    What risks lenders want to take is another thing.

    Seasoning is the term used to describe how long someone has been the owner on title. If the value jumps and the time since the last sale is short the lender might object to financing the subsequent sale. Their view is the market determines value and the prior sale was too recent for there to be a jump in value. Some of the time it can be resolved by showing how the prior sale was for a different situation (burned out shell vs. completely remodeled home). Most of the time the lender wants time to pass.

    There is no legal requirement. It is a business decision. Many of the fraud cases involve rapid sales and resales at higher and higher prices. If a lender has a 6 month seasoning requirement they will eliminate a lot of fraud while missing almost none of the mainstream business. Most lenders do not do that much investor business so ignoring a slice of the demand (from the seasoning) makes almost no difference to their income.

    Risk vs. Reward. Return on investment being secondary to return of the investment capital (money provided by the bank as a loan).

    John Corey

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    OP
    Member since 2008 · 24 posts · 0 votes
    19y

    I guess the bottom line is each is done on a case by case situation, state by state and lender by lender.

    This is why I was asking. I have a contract on a property that I'm getting directly from a bank. It was foreclosed, I'm buying it at $530.000, and the appraisal came in at $800,000. :badwords:
    I knew it was a good deal but not that good.
    I got a hook up with a friend who knows someone at the bank etc...
    I couldn't get any luckier

    I was on the front lawn of the property just looking around to see what I was going to attack 1st as far as remodeling for rental or resale. It’s in very good shape to begin with but you can always make it more attractive to buyers. :wink:

    I have this couple walk up and ask if I'm the owner and I said not exactly, I'm in the middle of buying it. They tell me how much they love the neihborhood yada, yada, yada :violin: . I'm so lucky to get it they have been looking in the area, never saw it for sale. :violin:

    I said I wasn't planning on living in it, they asked would I sell it, and how much.

    Yes, 725,000.

    We will buy it.

    Yes I know I'm lucky as shizzo!! :shock: :D :mrgreen:
    I can't take a contract because I don't own it and I hate to lose them to another home that pops up for slightly lower price. That is why I was asking.

    Thanks for the info guys.

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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    19y

    You can sell the home you do not own yet to the couple who walked up. You just have to sell it to them with conditions. The one condition is that you successfully close on your contract to buy the property.

    If you can not close you do not have to perform on the sale to them. If you do close then you are legally bound to perform is that is what you agreed.

    Your deal is a lucky one but the mechanics of the transaction is not that uncommon. Back to back, double close, what ever you want to call it. The name will vary based on how you handle things.

    Get a written agreement with the buyer. Work on finishing your purchase. Best if you already had your money lined up to just close as you were expecting and not get too fancy. Clean transaction on both sides.

    If the end buyer fails to perform there is not much damage as you were not planning to sell so fast in any event. If you get in and out quickly all the better. Frankly you can agree a $725K price and then offer then an extra incentive if they can close quickly. Take another $25K off or something like that. If they close 1-2 days after you buy because they want the extra discount you are rolling in the money for very little hassle.

    Keep it all legal and above board. Nothing to really worry about if you have the money to buy without needing the end buyer to perform. Use a good title company or lawyer depending on your state.

    Buy title insurance to protect your purchase. You can ask the title company not to issue the policy in your name for a few days. If the end buyer performs then it can be issued in their name and some money is saved. Standard practice with title companies.

    John Corey

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  • Ben Carmona
    Wentzville/St. Louis, MO · Member since 2008 · 359 posts · 1 vote
    19y

    CC,

    Your topic pertains to seller seasoning. Your buyer must let his bank or mortgage professional know the length of time you've been on title. These are questions that the should be asked by whomever is doing the loan but unfortunately do not; only later to cause problems during underwriting.

    Most A paper lenders offer 2 types of programs, conventional (conforming) and ALT-A (portfolio). Conventional loans follow Fannie Mae/Freddie Mac guidelines. Those guidelines do not have any seller seasoning restriction. However, sometimes the lender themself may take a more conservative approach by limiting this to ~90 days. The underwriter must see that the reason for the increase. As John explained, the appraiser must show it was purchased below market value and/or rehabbed. Your scenario would not fit under these guidelines because of the loan size.

    In that case, an Alt A loan may be required. These loans are written to guidelines from other investors on WallStreet and there are a # of them. A lender may have several AltA programs each being sold off to a different end investor. The guidelines can be different for each of them. Majority of these programs will have a 90 day seller seasoning period, some at 6 months, and a couple with no seasoning requirement.

    Double closes are being looking at a little closer by some lenders. Typically, a lender's closing department reviews title and home owners insurance after the underwriter has approved off on a borrower's credit, financial strength, and appraisal. The lender's closing department generally needs about 24-48 hours to review and work up docs before the closing can happen. Because the closer is not as proficient in determining sesoning time, as would it be an underwriter, double closes have gone through succesfully. In a double closing, the title company has to be cooperative in showing the borrower's lender a title report that the seller is already on title.

    Even lenders with no seasoning period still need you to be on title for at least a couple days. This way, the title company can really show that you closed and would give the lender enough time to evaluate the deal.
    As I said before, some lenders are starting to change their practices to have the underwiter take a closer look at the title during their approval process.

    You'll have plenty of other investors tell you though that double closing are completely fine. I've run the scenario by MULTIPLE lenders and each has told me that it's not a practice that they like to participate in, with the exception of private money or hard money lenders.

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    OP
    Member since 2008 · 24 posts · 0 votes
    19y

    Great info, I am very greatful to all that took the time to explain and post responses.

    thanks.

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  • Account Closed
    Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
    19y

    That is what the community is here for. Sharing ideas and advice so we all learn and grow.

    Oh, and make some money doing better deals.

    John Corey

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