All Forum Posts by: Ted Akers

@Jay Hinrichs

Very similar but we are just going at the same issue from slightly different angles. You may have slightly higher closing fees, but are well protected because you are in title initially. Same situation for me if the end-buyer does not close - I record the Deed held in escrow and own a property I never really wanted in the first place...LOL. I also validate my right to record the Deed by having a purchase option in the JV Agreement.

Hey @Jay Hinrichs,

Sorry, I did just see your question on the other thread but can answer it here. I try to have as much as possible EMD (not standard EMD requiring a signature from the buyer but non-refundable or as a security deposit) from the end-buyer. That can be a challenge for the flipper to get, but unless the deal has a fair amount of equity I do not want to be the only one in the deal with funds at risk (transactional is usually looking for 100%). I rarely will do deals with typical $1-2K standard EMD.

I also intentionally do not want to be a "lender" having to check each state for licensing requirements and possibly having to go through foreclosure time and expense. So, I provide equity capital under a type of JV Agreement with a Deed from the flipper held in escrow. A Deed held in escrow can be challenged if I were a lender, but I think less so under a JV structure.

@Isaac Blocher

Yes, I should have mentioned most charge fees of $395-$695.  I am a transactional funder and charge a fee of $495 with 1.75 pts.

I believe some do but most do not use a mortgage structure that includes a promissory note.  You want to check your state laws, and they do differ dramatically, because you may likely need a lending license if you are using promissory notes.  Transactional funding is generally controlled with strict escrow instructions to title or the closing attorney (the end-buyers funds must be in possession of the title company, etc.). 

Fairly typical is 1.75 pts. for a same day back-to-back transaction.  Some are at 2.0 pts. but rarely higher than that.

Hello @Kenney Vangalder.

You have two challenges if your end-buyer is using a conventional mortgage lender.  The first is that they do not allow assignments; which can be overcome by purchasing the property with transactional funding, personal funds, or hard money and reselling with a standard contract.

The second challenge is more of a consideration.  Most conventional lenders will require "title seasoning" of typically 90 days where you have to be in title before they will lend to your end-buyer.  Make sure the lender understands that you are under contract and are to purchase then your end-buyer will be purchasing from you immediately thereafter.  You want clarification regarding their title seasoning policies early in the process.  If not, the fact that you are not yet in title and that the transaction is a flip is frequently missed by the lender until later in the process, which costs you valuable wasted time.

Hello @David Oldenburg

Title Seasoning and ownership are the same thing. At the time of that post FHA had suspended their 90 day title seasoning requirement for about three years; but it is once again in place, and yes the new buyer cannot even enter a contract to purchase until day 91 after the investor/flipper has been in title (owned the property). If a flipper were to find a buyer using an FHA mortgage the flippers original purchase contract, wherever it came from, cannot be assigned to either an FHA or a conventional mortgage buyer. So, he has to go into title and execute a standard purchase and sale agreement when mortgages are required for the end-buyer.

You can also require in your purchase contract that you be allowed to bring partners, associates, contractors, inspectors etc to the property with reasonable notice to the homeowner at which time you could show to a prospective buyer (preferably with the homeowner not there or with the buyer prepped to not deal directly with the homeowner).

I have provided transactional funding for several deals in Florida; and as mentioned, title companies are going to require two separate and distinctly funded transactions. This has been a trend nationwide for several years (Florida started earlier than some other states) to satisfy the title underwriters. If it were assignable that could work with your fee showing on the HUD Settlement Statement.

Georgia uses attorney's rather than title companies to close.  The changes @Richard Balsam spoke of have been underway for the past few years.  I have funded transactional deals in Georgia and different attorneys all looked for two (your purchase then your resale) separately funded transactions.  It does vary a bit, but most areas of the country have been adopting this posture.  The reluctance to allow assignments is more of a state by state scenario and likely comes from pressure from the real estate licensing division of the state.