Lender problems closing "flips"


#1

We have been rehabbing distressed properties for about 5 months now. Lately, we have run into a problem with some lenders when we relist our rehabbed homes. They check the tax record and see that we purchased the property three months ago for $340,000. Now they see we are reselling it for $530,000.? It was appraised at $530,000 with no problem by their appraiser, and the buyer is putting 40% ($200,000) down!!!? But the lender is requiring that we send them all of our invoices showing how much money went into it.? I told them that they can check city permits, as we did everything under the city’s regulation, and that I will send them before and after pictures, but we do not want them sticking their heads into our business matters like that.
?
We were told that this is a new requirement with flips.
?
Any advice/comment?? Thanks!


#2

I typically send a nice letter outlining the work we did, the risk we took by buying at auction, the eviction, clean up, etc. I may even send them a basic accounting of dollars spent.
?
Keep in mind what this is about. The underwriter is looking to cover their butt in the case the file is audited - or in case the loan goes bad down the road. It is not about putting their nose in your business. Be friendly, and help them help you.


#3

They will either ask you for invoices or ask for 2nd appraiser to go out and appraise the property.