Lender Re-sell Restrictions
When dealing with banks, trying to flip properties can sometimes be challenging, especially with lender resell restrictions. Some government organizations are even telling investors how much money they can make before these restrictions apply. Not cool.
Right now we are seeing lender resell restrictions anywhere from 30 days, 45 days, and occasionally 60 and even 90 days.
So what can you do in order to get rid of the re-sell restriction?
Well my friend Cameron Dunlap created an awesome video that explains a few things you can do to help overcome these lender restrictions.
If it’s with a bank other than a government organization, many times investors can simply ask the bank to eliminate the re-sell restriction. Sometimes they will and other times they won’t.
When they tell you “too bad”, then you have one other option. This option requires you to have a cash buyer in place. This will not work if your end buyer needs financing.
Remember too that the type of houses this works well for are houses that need repairs.
In a nutshell, you are putting the property under contract with the seller. Then your end buyer (who is a cash buyer) becomes your private money lender. You will close with the bank and sell to your end buyer on a lease option. A mortgage is created in the amount of what your end buyer is planning to purchase it for. This also means your end buyer has a lien on the property to protect their interest. You will also sign a deed to your buyer and put it in escrow. Then after the restriction period is over, the deed that is in escrow is recorded and your end buyer is the new owner. During that 60 or 90 day period, the end buyer has been able to rehab the property because the lease option gives him those rights. Then he can sell to his end buyer who needs financing.
You don’t say in this lease option deal at the closing does the deed have your name on it or does it have to have your name and your buyers name on it and after the 90 days you your name falls off it when it is recorded.
If it has your name and your buyers name on it does he or she have to be there to sign. Also how is the money from your buyer to you handled? does he just give it to you or the title Company for the deal?
Interesting! I’m curious if this still applies today.