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Fannie Mae deed restrictions and rekey fees

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Mark Yuschak

Real Estate Investor from Grand Blanc, Michigan

May 05 '11, 11:48 AM


I'm growing really tired of the Fannie Mae deed restrictions and rekey fees. Is there any way around them?

I made an offer on a FNMA REO and we negotiated back and forth. In each one of my counters I had "no deed restrictions and buyer will rekey at his own expense". Each of their counters that part of my counter was removed. Eventually we reached a price agreement. I countered it once again and INCREASED the price and again added in the language of "no deed restrictions and buyer will rekey at his own expense". Just today I found out from the listing agent that my offer was rejected since they can't remove standard language from the addendums.

This proves to me that the deed restrictions and rekey fees are more important than what they net. Why do they really care if we resell the properties for a profit? And why do they find it prudent to charge $150 for a cheap set of used locks?

This really makes no sense and gets me hot under the collar.

Anyone have any tips or tricks on how to get those off the addendums?



J Scott Verified Moderator Donor

Real Estate Investor from Ellicott City, Maryland

May 05 '11, 10:00 PM
2 votes


The rekey fee is part of the addendum, so I believe that the asset manager can't negotiate on that. As for the deed restriction, while it's part of the addendum, you need to check a box and fill in the parameters (price, time period) to make it an inclusive part of the contract. So, in theory, if the asset manager doesn't check the box, the deed restriction isn't part of the deal.

Now, that said, it may be that the asset managers are following the company rules by always including it, and may not be allowed to "not check the box." Though I've seen times IN THE PAST when they've done this for me (whether they went against the rules or not, I don't know).

In my experience, this is how things used to shake out on deed restrictions:

- 1/3 of the time they forgot to check the box
- 1/3 of the time they agreed to remove it when I tried to negotiate it out
- 1/3 of the time I couldn't negotiate it away

But, over the past 6 months or so, I've had a different experience:

- 1/4 of the time they forgot to check the box
- 3/4 of the time they refused to remove the restriction even though I've tried to negotiate it away

So, it's possible they've gotten more stringent on having to include the restriction (unless they forget).

Or maybe my sample size is just too small to be meaningful... :D



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Cheryl C.

Residential Landlord from Reston, VA

May 05 '11, 10:42 PM


I closed a few months ago on a FNMA reo. I was surprised to see the Deed Restriction. The closing attorney said that it was a result of some fraud that occured in Baltimore, MD. I didn't follow-up as this was a rental for me. I'd like to know the specifics as well.



Don Hines

Real Estate Investor from Little Rock, Arkansas

May 06 '11, 01:13 AM


I don't really think any body knows. Probably even FNMA. I closed on one a couple of months ago. I thought I had skated by the clause then their attorney pointed it out the day before closing. When I started Peeing and moaning, their agent said it is illeagle to remove the clause! I went through with the deal anyway. If any politicians are reading this....it cost some contractors their jobs since I could not borrow enough to hire them. With the 90 day restriction, I have plenty of time to do the repairs my self.
Don



Jake Kucheck

Residential Real Estate Agent from Newport Beach, California

May 06 '11, 01:23 AM


On a somewhat related topic- a pretty big local FNMA listing agent mentioned in a negotiation recently that a 10% EMD is required from all investor offers.

Anybody out there hear something similar?



DAVID GAGE

Handyman from THUMB, Michigan

May 06 '11, 07:53 AM


Mark the last house i bought was a FM house and I had to pay the $150 for the re-key only to find out that they only keyed 1 door with a cheapo lock. I fought with the agent to know resolve(RealtyExecutives...Lapeer) guy wouldn't answer my calls.....stills burns me up when I think about it. I ended up changing the locks out for $35 on top of the $150....what a SCAM!



Stan Jackson

Real Estate Broker from Fort Pierce, Florida

May 06 '11, 09:52 AM
1 vote


Fannie Mae has to make up for a $8.5B dollar first quarter loss, somehow.



Mark Yuschak

Real Estate Investor from Grand Blanc, Michigan

May 06 '11, 11:19 AM
1 vote


David, I'm sure that was Ray Megie out of Lapeer. He's a huge FNMA lister. I've bought several of his listings and had to pay the stupid rekey fee. On the last one I looked up who the rekey firm was through the line item on the HUD. I then checked public records to see who that LLC was registered to with the State of Michigan. I called them and indicated that I don't expect halfass work for the amount of money I was shelling out for locks. She kept trying to convince me that Fannie Mae sets the prices.

It's all a scam, in my opinion.

The deed restrictions are really stupid too. I still don't understand why Fannie would care if we made improvements to the property, then resold it for a profit. It appears, at the surface, that they're just jealous.



Mark H.

SFR Investor from Phoenix, Arizona

May 09 '11, 07:17 AM


I got nicked on an auction.com fnma property for the "re-key" fee - I argued with the escrow company, because the contract stated I had to pay a re-key fee only if the property was on a "master key system", and no way were those $6.99 locksets "master keyed"... (keyed-alike maybe, buy not master-keyed)...
I ended up paying the fee, and was informed by the listing agent that they would perform the re-key after my deed was recorded..

I told them they wouldn't be allowed on my property after the deed was recorded... so the locks were never changed or re-keyed by them..

but I'm wondering now If I can file a "respa" complaint, since I was billed for services that weren't performed ?



Account Closed

May 09 '11, 08:37 AM


For starters....I list for Fannie mae.

That said, to "get out" of the rekey fee, just tell them you are going to rekey the property yourself prior to closing. By the way, the fee doesn't go to fannie, nor anyone else in the fannie system. It goes directly to the company the agent hires to do their rekeys (typically a friend). Long as it is done the day of/before closing you should be ok.

As for the deed restriction, typically no way out of it. I've seen a lot of people do a quit claim deed to themself right after closing for 100 dollars. I've then seen them reclose the deal (even with fha loans) at or above the prior deed restriction amount. Not sure if this is legal or not though.



Account Closed

May 09 '11, 08:39 AM


Oh, and at the very least, that 150 fee should be something you can dispute if you want to hire your own licensed locksmith to do it. They can't force you like that to pay whatever they want.

Furthermore, why anyone closes with fannie mae's title company is beyond me. Cheaper typically to do it with your own title company and the title insurance is worth more than toilet paper.



Mark Yuschak

Real Estate Investor from Grand Blanc, Michigan

May 09 '11, 11:31 AM


Originally posted by Aaron Churnick:

As for the deed restriction, typically no way out of it. I've seen a lot of people do a quit claim deed to themself right after closing for 100 dollars. I've then seen them reclose the deal (even with fha loans) at or above the prior deed restriction amount. Not sure if this is legal or not though.

Aaron, good insight! I've never thought of doing such a scenario. This really opens up the doors to possibilities if this in fact works.



J Scott Verified Moderator Donor

Real Estate Investor from Ellicott City, Maryland

May 09 '11, 11:45 AM


Originally posted by Mark Yuschak:
Originally posted by Aaron Churnick:

As for the deed restriction, typically no way out of it. I've seen a lot of people do a quit claim deed to themself right after closing for 100 dollars. I've then seen them reclose the deal (even with fha loans) at or above the prior deed restriction amount. Not sure if this is legal or not though.

Aaron, good insight! I've never thought of doing such a scenario. This really opens up the doors to possibilities if this in fact works.

Not sure I understand the purpose of doing this?

Deed restrictions "run with the land" and are not removed just because the deed was transferred. In other words, if the deed restriction says that the property can't be sold for more than $x for 90 days, then it doesn't matter how many times it's sold within that 90 day period, none of the sales can be for more than $x.

So, unless I'm missing something, the above idea doesn't provide any benefit.



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Donna Smolinski

Carlsbad, California

Oct 26 '11, 06:59 PM


Lately, it seems to be taking me about 90 days to rehab, market & close our properties so I'm considering purchasing some FNMA REOs. I assume you can go under contract before the 90 days is up, but NOT close until the 91st day, correct???



Alex K.

Real Estate Investor from Sparks, NV

Oct 26 '11, 09:15 PM
1 vote


"I assume you can go under contract before the 90 days is up, but NOT close until the 91st day, correct???"

That's correct. I went under contract to sell right after closing on a FNMA property and just put the closing date out 3 months. In the mean time I'm renting it to the buyers and they are rehabbing it to live in.



Donna Smolinski

Carlsbad, California

Oct 27 '11, 09:41 AM


thx... that's what I thought but wanted to be sure there wasn't an additional restriction about going under contract in the 90 day period.



Chris Clothier Verified Donor

Real Estate Investor from memphis, Tennessee

Oct 27 '11, 10:16 AM


Originally posted by J Scott:

But, over the past 6 months or so, I've had a different experience:

- 1/4 of the time they forgot to check the box
- 3/4 of the time they refused to remove the restriction even though I've tried to negotiate it away

So, it's possible they've gotten more stringent on having to include the restriction (unless they forget).

I copied part of J Scott response because this is exactly what we have happening in our area. It hasn't stopped us since we purchase everything ourselves an renovate first, but it is a nuisance. We have noticed a more uniform approach where everything has a 90 day deed restriction on it and it is definitely happening more and more.

It could absolutely be a beginning ploy to open the portfolio up to hedge fund style companies or REIT's for massive sell off. If the individual smaller investor gets squeezed out by the restriction, then they give themselves a perfect reason to sell big peices of their REO portfolio to institutions.



Medium_new_mi_logoChris Clothier, Memphis Invest, GP
Telephone: 901-212-9647
Website: http://www.memphisinvest.com
www.MemphisInvest.com 1(877)-773-9998 Chris D Clothier


Cheryl C.

Residential Landlord from Reston, VA

Oct 27 '11, 10:32 AM


I'm closing on two BOA shorts in a couple of weeks. The deed restriction is 30 days. I'm writing on an reo tomorrow that has a 90 day restriction.

These restrictions don't bother me as I close cash and the rehab/marketing time is really not impacted.

OT- I'm planning on holding these properties until we hit the spring selling season (In DC, this can be mid-feb). Would you guys sell asap or wait for the spring market? I don't really have much carry-cost as I pay cash. What would you do?



David Belote

Rehabber from Charleston, South Carolina

Nov 15 '11, 11:52 AM


I have a deal and they slid that one in on us thinking it was typical fannie mae addendum, they had 10% earnest money also, I don't have any good advise other than there are plenty of good deals out there and let the deed restrictions "rot" any maybe they'll wise up and quit there "crap".



Rich White

Eastlake, Ohio

Dec 07 '11, 08:17 AM


I recently completed the transaction from hell. The property transferred to me 4 moths ago and as the buyer was FHA the process was crazy, even thought I was beyond the restriction period but as it was a fanny home to begin with and my “selling so quickly” I had to show I invested enough in the property to justify the price difference. I was required to have 2 appraisals and they tried to get me to guarantee the roof for three years even though no roof work was done. They then asked that I have the roof certified by a registered contractor guaranteeing the roof would not leak for three years. What roof in there right mind would do that. I also had to have the HVAC certified. The government is severely limiting the recovery of the housing market with these antics.



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