Short Sale Back to Back Closings Now Easier

HUD WAIVES ITS TITLE SEASONING REQUIREMENTS

The FHA recently rescinded its 90 day anti-flipping rule for a year. This will allow FHA buyers to purchase properties that have recently been purchased by investors, helping with title seasoning requirements Hud Waiver of Requirements of 24 CFR 203.37(a)(b)

Back to back closings take a short sale deal and turn it into two separate and distinct transactions. The first transaction is the homeowner facing foreclosure selling to the preforeclosure investor. The second transaction is the real estate investor then selling the property to the end retail buyer. The first seller’s lender must agree to take less money than what they are owed by the first seller. When the first seller sells to the first buyer, all the proceeds go to the first seller’s lender, first seller gets nothing, and has to leave the building.

Now the first buyer, the person buying from first seller, immediately sells it to second buyer for several thousand more, making a profit.

Effective 2/1/2010 Waiver of Requirements of 24 CFR 203.37(a)(b)
Transactions must be arms length – no inappropriate collusion and no identity of interest between the buyer and seller or other parties.

In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender justifies the increase in value by retaining loan file supporting documentation and / or a second appraisal that verifies the seller has completed sufficient renovation / repair / renhabilitation work; orders a property inspection and provides inspection to the purchaser prior to closing. Waiver is limited to forward mortgages, and does not apply to Home Equity Conversion Mortgage (HECM) for Purchase program

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