Title Seasoning - What Investors and Agents Must Know

Ever heard of flipping? There are two types: honest business people with integrity and morals who buy low and sell high and scumwad dirtballs who cheat, lie, steal, and spoil the system. Remember when you could take out a little pad of paper with some numbers on it, scratch out some words and a monetary value, sign it at the bottom and hand it to the person behind the counter and leave with your stuff without so much as showing a driver's license? Like the days of writing checks with no ID gone are the days of unseasoned sales without jumping through a great lineup of hoops.

INVESTORS AND AGENTS READ THIS:

If you want a smooth transaction and you want the best loan for your client, buyer, self, remember the lender is the one who is actually purchasing the home unless you are paying 100% cash. If there is a lender involved the home belongs to them. They are giving you permission to use the property under very specific conditions until they are relieved from their exposure. What they, for the most part, want to see is six to twelve months passing between closing (A) and closing (B). This is called "Seller Seasoning" and it refers to the amount of time the seller from closing (A) has their name on the title before closing (B) to the new buyer. It matters not if (A) and (B) are related. 

Title on seasoning is what virtually killed simultaneous closings where in buyer (A) closes on the property and immediately becomes the seller to buyer (B). Lenders and closing attorneys/title agents are very concerned when this happens and generally are not going to allow it. An even bigger problem is encountered when there is an increase in value between closing (A) and closing (B) even within a couple of months. 

INVESTORS PLEASE READ THIS:

There are a number of "gurus" who continue to teach you that you can and should title all of your investment acquisitions in the name of an LLC for protection reasons. Okay, if you've read my blog more than once you've likely seen me write "just because you can does not mean you should". In this case, where you plan on refinancing or selling, you really should not from a conventional financing standpoint. (I am not giving you legal advice I am telling you how the finance industry views this.)

I constantly receive new clients who purchased a property using either conventional or private funding and either at or after the closing titled that property in the name of their LLC. Conventional lenders do not allow titling into an LLC so a Quit Claim Deed had to have been issued after the closing contrary to the binding agreement the borrower (individual) made with the lender not to transfer the title. But that's another story.

The real problem is encountered two years down the road with the owner, who has the property titled in their LLC., wants to refinance outside of conforming limits to liquidize the equity. Since conventional lenders do not offer financing to companies and the title and existing loan must be in the name of the person requesting the refinance the title must be Quit Claimed back to the individual's name. Why is this a problem? It resets the clock on seasoning on title.

WHAT ONCE WAS IS NO MORE BUT MAY RETURN

Until just a few short months ago it was fairly simple to find a lender who had expanded criteria and underwriting guidelines. Unfortunately there were those who took advantage of the generosity of the lenders and caused everyone, legitimate and scurvied, to have limited ability when it involves seasoning on title. This does not mean there may not be some lenders who are toying with bringing this back under certain circumstances. 

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Ken Cook is Director of Operations for Novation Mortgage, a direct mortgage lender in Georgia and also licensed in Florida. A a Georgia real estate investment financing leader they have vast experience with issues such as these and are second to none in quick efficient decisioning for investors. Georgia Department of Banking and Finance numbers don't lie ... they blow their "competition" out of the water with experience, ability and service.