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Rules are Rules for Title Seasoning
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Twice this week I’ve ran into issues with buyers who wanted to buy distressed homes in Colorado Springs with FHA loans and the 
properties didn’t have Seasoned Titles. Hence, I thought it was great subject for a blog post, as I didn’t truly understand it until this week; and my guess is that many Realtors and most consumers also don’t understand it.
If a buyer is looking at a property and is planning on getting an FHA loan, there is a title seasoning requirement of 90 days. In other words, the property must have the title recorded in the seller’s name for 90 days before the closing and funding of the FHA loan. This definitely stops any double-closings or a short term (less then 90 days) flip.
The History of Title Seasoning
I’m sure we’ve all heard stories about the crooked investor who stole a home from a sweet Aunt Sally for $80K, spent a few grand on carpet and paint, then sold it 30 days later to a homebuyer for about $150K. Because of stories like this, FHA put this rule into effect to discourage investors from flipping properties several years back. The theory was that it is supposed to tighten up lending requirements to reduce abuse and mortgage fraud.
But both of the properties I was looking at for potential buyers had been bought at the Public Trustee Auction in El Paso County. One of 
the properties had new paint, new windows, new carpet, new bathrooms, new hot water heater, a huge new patio poured, and new steps built in the front of the house. The seller had bought the property for $113,000 and was asking for $199,000 for the property. He certainly had done a fair amount of work on the property and it showed wonderfully. The property had been purchased at auction in June and my client wrote an offer on the property in September, we were just past the 90 day title seasoning rule put in affect by FHA.
The other property I looked at last night with another buyer, and this property was purchased at auction in August, hence the new owner had only had it for about 30 days. It also looked like it had had substantial amount of work on it; but my client couldn’t purchase it because of the FHA Seasoned Title Rule. Still not quite sure I understand the logic of the rule; but I get that rules are rules. Maybe there should be exceptions for properties that are bought at the Foreclosure Auction?
Research is important
If you are interesting in buying distressed properties in Colorado Springs, make sure and do your research, especially if you need to use an FHA loan to purchase it. Don’t be surprised.
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Related Articles:
- Don’t let your dream house become a nightmare
- Buying HUD homes in Colorado Springs, Part II
- Buying HUD homes in Colorado Springs, Part I
- Pre-Qualification or Pre-Approval, which do you need to buy a home?
To find out more information about buying a Colorado Springs foreclosure, call ….
Kathy (719-287-1049) KTorline@msn.com
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