Posted by Barbara_NY on January 17, 2003 at 17:53:14:
Unless you’ve done your homework you may find your potential purchaser is working with a mortgage company that requires “seasoning” equal to 3-6 months or as much as 1 year before it will lend their borrower the funds. In case you are not aware, seasoning simply means the current owner has held title to the property for a certain amount of time (usually no more than 1 year). The purpose of seasoning is to afford the lender a shield, of sorts, against impropriety and fraud in its lending practices.
My experience is that when dealing with a foreclosure sale this seasoning requirement is more loosely enforced, if at all, since the expectation is that a purchase due to foreclosure is more difficult to mask deceit. However, I have found too often that the mtg broker and his/her superiors may not have enough seasoning themselves to know how to get these deals approved, so they stick to the rules they know and say no to the loan.
What you can do is establish a relationship with a couple of money lenders ahead of time who will lend on that kind of deal. Then, recommend the purchaser work with your lender. If the purchaser is unwilling or not interested in using your person, have the Contract of Sale state that if the purchaser is unable to close with their lender, and if all else is equal, your lender XXX Co. will be used. I don’t have one of my contracts handy so I don’t have the exact language to insert , but your attorney can help with that. That way, the purchaser cannot simply get out of the Contract of Sale because their loan wasn’t approved… they have to try your person first.
Also, regarding taxes, just be sure you reinvest your profits using a 1031 exchange or purchase the property through a Roth IRA to reduce the amount of taxes you are obligated to pay. If you decide to keep your profits, just keep in mind that taxes will eventually have to be paid and figure out a way you are comfortable with to have it available when the time comes.
Bottom line… all can be handled effectively if you plan ahead.
Good Luck