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I'll try to keep this short. I made a deal to purchase a house from the previous owner's agent. I looked at it when he had it listed but he ended up purchasing it himself for an insanely low price as a short sale. The original price was $250,000, the final listing price was $200,000 and he got it for $160,000. He planned to do a fix and flip. I contacted him when he was in the process and told him I was interested and we worked out a price of $235,000 with just the work done that I wanted. This was all contingent on selling my current place and getting financing.
Now I am wondering how difficult it will be to get a loan on a house priced $75,000 higher than he paid only a few weeks earlier. It seems that, as long as it appraises for $235,000 or more (which I'm almost certain it will) I would be fine. Is that true? If they want 2 appraisals, do I have to pay for both of them? And will they require paperwork from him showing the work done? Thanks!
Your first question to your lender should be asking them if they are ok with an unseasoned title. Many lenders used to not accept a title if it wasn't for 12 months. Some have relaxed that rule down to 6 months and some 3 months. Some don't care at all anymore. But, yes, the owner should be prepared to submit invoices for work done.
I closed a deal 3 weeks ago where the house was bought as a foreclosure in February. It was a VA loan. I prepared the seller to present paperwork before I even had the buyer submit an offer. In the end, the lender didn't ask for any of the paperwork as the appraisal was a no-brainer in this situation, but if there was a slight hint of appraisal issues, they would have asked.
I think your biggest issue will be the appraisal, even with proof of improvements many appraisers are gun-shy and there's no incentive to pump up a value, and lots of reasons to come in low.
If it were me, I'd strongly consider a loan broker over a mega-bank, if they know in advance that the home is a flip, they can direct the loan to a bank that isn't quite as skittish.
Some flippers will pay for a 2nd appraisal, some won't, it's all negotiable at the beginning of the deal, so certainly ask for it - you're coming in early, the seller won't have any days on the market if you're ready-to-go the day he's finished.
I am working on a similar deal now. Invoices for the repairs are required. As well as a 2nd appraisal. Also a home inspection is required and if there are items listed on the home inspection for repair those must be completed as well before the loan is clear to close.
ok this question probably has already been answered, but if a house is flipped and then put on market, does the buyer have to pay for it whole? or can they take out mortgage on it? and if they do take out mortgage on it, how does the one that flipped it make a profit or get paid? do the monthly payments go to the flipper each month?
I'll try to keep this short. I made a deal to purchase a house from the previous owner's agent. I looked at it when he had it listed but he ended up purchasing it himself for an insanely low price as a short sale. The original price was $250,000, the final listing price was $200,000 and he got it for $160,000. He planned to do a fix and flip. I contacted him when he was in the process and told him I was interested and we worked out a price of $235,000 with just the work done that I wanted. This was all contingent on selling my current place and getting financing.
Now I am wondering how difficult it will be to get a loan on a house priced $75,000 higher than he paid only a few weeks earlier. It seems that, as long as it appraises for $235,000 or more (which I'm almost certain it will) I would be fine. Is that true? If they want 2 appraisals, do I have to pay for both of them? And will they require paperwork from him showing the work done? Thanks!
But it wasn't appraised at $160K so why would it matter? IF he got a deal on a short sale and fixed it up and it's in line with the area values $235k should not be an issue.
Did you sell your place? I would think that's the hard part.
ok this question probably has already been answered, but if a house is flipped and then put on market, does the buyer have to pay for it whole? or can they take out mortgage on it? and if they do take out mortgage on it, how does the one that flipped it make a profit or get paid? do the monthly payments go to the flipper each month?
No, the buyer can get a mortgage. The bank gives the money for the sale to the person who sold the house, you get a loan to pay back the bank monthly,
A flipped property basically works the same way any home is sold. It's up to the seller to decide if they want a cash buyer or for the person to have bank financing. If the person who bought the short sale got a loan, he has to pay back what he borrowed and keeps the rest as profit minus what he spent to fix the place.
The only way a seller gets monthly payments instead of a lump sum is if they do a rent to own scenario.
Please be careful with emphatic answers, mileage varies here. FHA requires a 2nd appraisal within 90 days. VA has no flip rules. Conventional may require documentation. The level of documentation varies lender to lender. On our loans (portfolio) I have gone from nothing required to turning in a listing from when the flip was purchased and finished, to 2 appraisals because the seller and buyer were related.
The OP should be fine provided the seller pulled permits. Personally, that can be the dicier issue.
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