BiggerPockets

I went to put an offer on a Fannie Mae REO, and I had to sign a disclosure that I understand that there will be deed restriction that I cannot sell the property for 90 days for more than 120% of the purchase price! :shock: I also cannot get a loan for over a certain amount of the purchase price either (the exact restriction for that part wasn't filled in yet). This restriction will be written into the actual deed that I receive and will run with the property for the restricted time period.

I was shocked. I dropped my offer from 26K to 18K. :D

The property needs quite a bit of work, and I think its crazy that a quasi-government entity is going to start dictating what properties can be resold for.

Hi Ryan,
Sorry to hear about this for you and for all of us who believe in free enterprise. Government involvement usually leads to quirky requirements :goofy: I like your response of lowering the price. Are you able to sell for any price after 90 days? If so, let it sit a while! Would you please tell me how to place my " signature" at the end of my messages? I formed one in my profile but I have yet to figure it out. Maybe I can't do that for 90 days :wink:
Take care,
Mike Mitchell

This one was outlined as a 90 day restriction only. There was no restriction after that. For me as a wholesaler, the first 90 days is key.

There was a blank in the disclosure form where they could fill in any amount of time (mine was filled in with 90 days). I'm guessing they probably do different time frames for different markets/situations. I'm not sure.

I have a question about the Fannie Mae REO deed restriction.
I am curious.....If you purchased the property under a land trust... and sold the beneficial interest in the trust before the 90 days was over... since you are NOT selling the property but the trust would this be illegal or a violation? The real estate is conveyed via a deed, you are only selling your interest in a trust... any comments on this ! Possibly someone who has done it before .....anyone?

We sell Fannie mae REO, we disclose right up front with an offer that there is a deed restriction. While I dont 100% agree with it, its like the 90 day FHA anti flipping restriction, but more restrictive as it targets any cash/financed transaction for 90 days after closing (or deed recordation more accurately)

I am realtor sellig fm house to investor and this addendum is blank where it has the time limit and the amount they can resell the house for. what if they buy property for $40,000 and put $20000 in and then sell it for $90,000. If the rule of it can not be resold for 120 percent more than sales price, is that just for three month period or forever

Originally posted by Eddie Ziv

Please, let me understand this properly. To the best of my knowledge, this restriction is in force only should the property's transactions ( A to B and /or B to C) involve a loan. If all transactions are cash transactions, there are no restrictions. Correct?

From my understanding only FHA has the 90 day restriction so no if you have cash you're not bound by the 90 day restriction rule.

Originally posted by Stephani

Eddie,

No, the Fannie Mae deed restriction applies to cash sales as well.

I've only wholesaled 1 Fannie Mae REO, last year, and had the same restriction. I was only making 4 or 5 grand on the deal, so it didn't effect me, as I wasn't selling for more than 120% of what I bought it for.

Steph

Stephani, without disputing the fact, that doesn't make sense. What is their business when and for how much do I sell, if there is no loan involved?

Originally posted by Scott M.

You can also get that deed restriction reduced - after you get the deal locked up have your agent submit an addendum moving it to 30 days or 15 days or 0 - I have been very successful with that strategy.

HI Scott,

I would greatly appreciate if you can explain to me what do you have to do to get the reduction? Also what are the reasons that would approve the request for the reduction?

Originally posted by George Gogas

I would greatly appreciate if you can explain to me what do you have to do to get the reduction? Also what are the reasons that would approve the request for the reduction?

First, the restriction is on the transfer of the deed, so it doesn't matter what type of financing your end-buyer is using (cash, FHA, convention, etc), the restriction is still there for 90 days.

Agreed that this doesn't make much sense (just like FHA), but if you sign the contract and agree to it, that's what's going to happen.

As for how to get this restriction lifted, after you have a ratified contract with the seller, have your agent submit an addendum that stipulates that the title seasoning is reduced or eliminated. If the FNMA asset manager signs it, you're good to go. If they refuse to sign it, the restriction will stay in place.

Given that, it's best to make this request if you have other contingencies with which you can back out of the deal, as they would likely rather you proceed with the deal, even if it means lifting this restriction.