We bought a home as an investment to "flip" and now the buyer's mortgage company is asking why we flipped it and I am wondering what the problem is? They told me the bank does not like to finance a flipped property, please explain? Thanks in advance.....
2006-08-11 06:06:58 · 12 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
We bought the property cash and now we found a buyer and the buyer's mortgage company does not want to finance it because we(seller) bought the property to flip.....Sorry for the confusion...
2006-08-11 06:13:41 · update #1
As a mortgage broker, here is the real reason...
Lenders are concerned with fraud and collusion on the part of buyer, sellers, and appraisers. There have been scams against lenders where all three of the above parties are in on the scam.
Essentially it works as such: Seller agrees to sell to buyer for a certain price. The buyer hires an appraiser to present a value that is at least as high as the purchase price. But like I said, they are all in on the scam. They get a loan for MUCH more than what the seller just recently paid for the property, all 3 split the proceeds, never make a single payment on the mortgage, and then disappear.
The key tip-off to this kind of scam is the length of time between the purchase and the sale.
I'm not saying that you are attempting to defraud a lender. I am simply giving you the reason that some lenders are wary.
Feel free to give me a shout if you would like more information or assistance. There are many lenders that will do this kind of transaction.
2006-08-11 08:14:35 · answer #1 · answered by your_in_goodhands 2 · 0⤊ 0⤋
Usually, it's just an issue with the lender. Granted, some, certainly not all, will be ok with financing a "flipped" property, but there are those occasional lenders that hesitate.
The primary reason that I think lender's are scared about flipped transactions (as well as us in the title company industry) is that there are those few "bad guys" out there that are looking to score some money (which I'm sure you're not.) What some people will do is have a friend who is an appraiser. They'll get their friend to go out and appraise the property at $300K (just a figure.) Well, after that bad guy agrees to buy the property at $300K, he'll get his appraiser friend to go "re-appraise" the property at a higher amount, say $400K. That new buyer will get a loan for $400K from that lender, and the bad guy middle-man makes a $100K profit... for nothing!
It's just a scary situation for a lot of lenders. Now, unless you've owned the property more than 3 months, or in that time from of 6 months to a year, lender's will just hesitate to make sure that no invalid liens have been filed on the property that may cause issues in the future.
2006-08-11 15:08:08 · answer #2 · answered by mac_218 2 · 0⤊ 0⤋
Flips usually have inflated values, or they are hard to document the actual value as being true. When an appraisal is completed on a property, the appraiser uses comparable properties, but they are not usually 'flip' properties so the value may not be consistent. Also, neighborhoods with 'flip' properties are usually alreay distressed neighborhoods, so the value of the neighborhood may decrease the value of the house after the sale. Then, the bank would lose money on the loan if there was a default.
2006-08-11 15:18:11 · answer #3 · answered by ? 2 · 0⤊ 0⤋
ok the reason for this is because with flipped properity there are a lot more people doing it these days trying to make extra loot unfortunetly some people do this and they do a half a** job and for a bank to finance something it has to meet certain criteria well these smae people who get the job done in a weekend do great jobs covering stuff up and a month later you realize that your roof in just paper mache' after a good hard rain so a lot of banks are kind of hesitant so mabe if you came up with paper work of all your purchases or mabe have the house inspected yourself it may cost a little more but these are documents that you will have until you sale the house and you can usualy add these to the price of the house as an extra feature good luck
2006-08-11 13:16:06 · answer #4 · answered by p-nut butter princess 4 · 0⤊ 0⤋
They don't make as much money. The loan gets payed off right away, and so they do not collect the interest the accrues. A lot of loans come with provisions that they cannot be payed off within the first year or 2.
2006-08-11 13:09:08 · answer #5 · answered by Bors 4 · 1⤊ 1⤋
because flipped homes are usually foreclosures or have been tied up in probate. these issues are not always completely solved and some legal things come up and the bank may lose some money due to them.
2006-08-11 13:12:53 · answer #6 · answered by Princess1 2 · 0⤊ 0⤋
90 percent of your first years payments are interest (100 percent profit to the bank)
so by selling the house right after you bought it.
YOU get the profit and not the bank...
2006-08-11 13:10:58 · answer #7 · answered by Anonymous · 0⤊ 1⤋
Go to another lending source:
Call Damico Consulting in Ingleside, IL (I don't have the number but he's a wizard).
Slainte,
-D
2006-08-11 13:10:51 · answer #8 · answered by chicagodan1974 4 · 0⤊ 3⤋
It don't make sence to me. Did you ask the bank what the big deal is? Please let me know what they say. My address is-ancestorhorse@yhoo.com
2006-08-11 13:12:14 · answer #9 · answered by ancestorhorse 4 · 0⤊ 0⤋
http://www.lendermark.com/house_flipping.htm
2006-08-11 13:11:40 · answer #10 · answered by lendermark1 2 · 0⤊ 0⤋