BiggerPockets

Any words of caution when flipping a fannie Mae property? I figure I'll use an LLC and double close. Thanks

The Fannie Mae 90 day restriction is for when you close on the sale, right? So I buy a property, fix it up in 30 days, get a buyer 16 days later, and then close 45 days after that, I'll be past the 90 day limit?

If I purchase in a LLC doesn't that make it possible to go around the deed restriction? I plan on a cash buyer who would buy the LLC from me.

Herbster, you are correct, this is one of a few ways to cirumvent the 90 day deed restriction. You can accomplish the same thing with a trust. make the offer in teh name of the trust and name your buyer as teh beneficiary. They are the buyer that way and no title is transfered other than the original purchase. (For all cash transactions only)

Here's the restriction (cut & paste, sorry for the caps):

"GRANTEE HEREIN SHALL BE PROHIBITED FROM CONVEYING CAPTIONED PROPERTY TO A BONAFIDE PURCHASER FOR VALUE FOR A SALES PRICE OF GREATER THAN $_________________ FOR A PERIOD OF THREE MONTHS FROM THE DATE OF THIS DEED.

GRANTEE SHALL ALSO BE PROHIBITED FROM ENCUMBERING SUBJECT PROPERTY WITH A SECURITY INTEREST IN THE PRINCIPAL AMOUNT OF GREATER THAN $______________ FOR A PERIOD OF THREE MONTHS FROM THE DATE OF THIS DEED. THESE RESTRICTIONS SHALL RUN WITH THE LAND AND ARE NOT PERSONAL TO GRANTEE.

THIS RESTRICTION SHALL TERMINATE IMMEDIATELY UPON CONVEYANCE AT ANY FORECLOSURE SALE RELATED TO A MORTGAGE OR DEED OF TRUST."

(Sales representative to calculate value to be inserted in paragraph at 120% of sales price rounded to the nearest $100).

I've seen this filled out a few ways, including the words "120% of purchase price" instead of the $____, or just the actual number.

Note that this restriction does not prevent you from wholesaling a property as long as you make less than a 20% margin.

Not too that the second paragraph prevents you from borrowing more than 20% of your purchase price for rehab or refinance money via a second.

Transferring the beneficial interest in a land trust or membership interest in an LLC will usually get around this restriction.

Researching resent sold properties I have found many Fannie properties that do not impose the 20% for 90 days restriction. You can always try to get around that.

I have tried a couple of times, but have not succeeded yet doing this. I did buy a Freddie Mac property without any restrictions.

Herb, you are correct, as long as it goes as your original post, LLC or THT, depends on cost and exit plan, & $.

First, there are a few big banks (Wells Fargo and Suntrust, for example), who are doing sub-90 day FHA loans...so you don't have to go with a smaller bank if you don't want to...

That said, I almost always have my buyers use a regional bank near me, as my broker has a great relationship with the underwriters there.

I incentivize my buyers to use my broker/lender with the following:

- I will pay for all appraisals
- I will pay all closing costs
- I will return earnest money if the loan can't get done (through no fault of the buyer), even if it's past the financing contingency date
- I let the buyer know that we can get an FHA loan done in 3 weeks in most circumstances

For the resales under 90 days, nearly all of my buyers use my broker/lender...once they understand that their lender probably can't get it done (and mine has done it dozens of times), most buyers tend to be pretty reasonable...

I am not sure about that. Freddie has far fewer properties than Fannie so that was the only contract I ever saw.

Wow! This thread may have answered my biggest worry I lived with ever since I purchased from Fannie my REO in June! Shows how valuable is reading of the posts!

I do have the 90 day restriction.

I also thought of LLC as the by-pass method but my intention was to rehab and flip, at least till now. (In essence I would be partnering with whoever would provide $$ for the rehab.)

Reading this I am thinking that selling as is may be a better choice in my case; a great time saver and not much of a difference in the end profit.

But this is not all. I have done my purchase without a closing attorney and now am told by a county clerk that the deed is not yet recorded. Apparently for out of state buyers (like myself) recording would be attorney's function.

This would mean my 90 days did not even start yet? Where would I find more info on this? Fannie?

Let's assume the LLC method would take care of the waiting part. I still have one more concern when it comes to whole-selling. Actually, this particular concern was the reason why I planned to rehab and flip initially. I thought the buyer might be "turned off" by how little I paid for that REO. Could this be an issue for a buyer? (It was a cash investment but a small one) The ARV I am pretty sure I estimated correctly. Sorry if this is a bit off topic and thanks in advance for possible answers.