"Only owner occupied will be approved"

13 Replies

Good Afternoon BP.

Currently searching for what will be my second investment property in the Baltimore county area. Came across a disclaimer in a listing (on a property that passes all my initial criteria with flying colors) that reads; "Bank approved short sale ~ approvals will be obtained within 48-72 hours.  Only owner occupied buyers will be considered for approval"

This just confuses me from multiple angles. Who is declaring this requirement? The bank I presume...?

Next. From a seller perspective, what does it matter if the buyer is occupying the home or not?

And finally, as a buyer, must you disclose your intentions with the property to the seller? I can understand a lender needing to know this information, but a seller needing to know is something I cannot wrap my head around.

Anyways, I figured the BP community would have the insight that I'm looking for.

Thanks as always.

Joe

Interesting. From a sellers perspective the only thing that comes to mind is this: most owner occupants aren't educated real estate investors and thus don't meticulously analyze properties to see if it's worth making an offer. So where a house flipper might be interested in a 100,000 dollar property, they might only be willing to offer $60,000 for it, whereas someone who wants to live in the property might offer full market value, or even get into a bidding war with another potential buyer and actually buy it over what it's worth at say, 115,000! 

That being said, it's not legally required for you to disclose why you want to purchase the property from the seller (Unless I would assume they are the ones financing it for you). As far as they know you're totally going to be living in the property for many years to come :)

I have seen this with short sales, but its more common with foreclosures to have a 30 day "first look" period for owner occupants. If the property doesn't sell in those 30 days they open it to investor offers. I'm not sure why they do it.

I had the same language written into a foreclosure I put a bid on.  Basically, the bank wanted me to buy, live, and use their financing on the deal.  Based on their checklist and my offer, I should of won the bid but I was outbid by a cash buyer that offered exactly $10K above my offer at 11:55 AM on the last night of bidding.  So much for the rules outlined by the bank.

Also, by having a stable owner living in the property (instead of renting/flipping), it stabilizes the area for other homeowners. 

Originally posted by @Account Closed :

I have seen this with short sales, but its more common with foreclosures to have a 30 day "first look" period for owner occupants. If the property doesn't sell in those 30 days they open it to investor offers. I'm not sure why they do it.

I agree with what Nick said above.  I have seen/heard of on several occasions where a bank-owned property had a time period where they would only consider an owner-occupant's bid.  After the 2-4 weeks anyone could buy the property.  

Zane Voss

If it is a government backed short sale, they do this for neighborhood revitalization AND to give owner occupied purchasers a chance to get into a home without having to compete with cash investors. The idea is that getting people to become homeowners makes them care more for the home and keeping it nice, improving neighborhoods. Same reason as to why the first look program is available on REO's.

You might have seen short sales that do not allow a deed transfer within 6 months of the sale, as a restriction added to the deed (as a condition noted on the formal short sale approval).  Same idea, trying to push investors out, and to enable owner occupieds to compete. 

Who is to say you can't occupy the home, stay in it for a short period of time to fix it up and get it looking great, and then turn around and sell it.   Is that allowable?

Originally posted by @Joe Gemma:

Good Afternoon BP.

Currently searching for what will be my second investment property in the Baltimore county area. Came across a disclaimer in a listing (on a property that passes all my initial criteria with flying colors) that reads; "Bank approved short sale ~ approvals will be obtained within 48-72 hours.  Only owner occupied buyers will be considered for approval"

[In my book there is no such thing as "bank approved short sale". It only exist with the real estate agent trying to promote this listing. 

Bank approved short sale means that short sale is NOT YET approved but property is Qualified for a short sale. Get it! 

There is no offer on the table thus short sale is NOT approved. 

Approval will be obtained within 48-72 hours. This is another real estate agent's advertising. There is no such thing and it does not exist. If it does, prove it from the time you submit the offer...This is just no way...verbal approval is not an approval in writing...]

This just confuses me from multiple angles. Who is declaring this requirement? The bank I presume...?

[Who is declaring this requirement? The listing agent. 

It is not the bank, the bank has no legal dictation on how the house could be sold or at what LISTING PRICE. Yes, That is right! The price is set determined BY the seller from the advise of an agent.

The bank at this point is just a mortgagee and does not hold legal title and has no equity or legal title on the property. 

It could only approve or denied your offer. Any other condition is just agent's own condition attached to the listing... like cash offers only. Cash is cash does not matter it is 100% your cash or 80% cash from a loan. The agent just want CERTAINTY to CLOSE which I don't blame them.]

Next. From a seller perspective, what does it matter if the buyer is occupying the home or not?

[No It does NOT matter, PERIOD. She or He should be glad and thank you for buying his or her home and save him or her from foreclosure. Agent is making it difficult for you. He or she just don't like investors or like YOU since you don't come with cash deal and have to get a LOAN (hello how do i know...haaa); however, there is CC&R in the approval letter that states..."buyer could not transfer title within 30 days..."].

And finally, as a buyer, must you disclose your intentions with the property to the seller? I can understand a lender needing to know this information, but a seller needing to know is something I cannot wrap my head around.

[Absolutely not. It is a FEE SIMPLE property and after closing seller has and will have nothing to do with you and or the property especially you signed "As Is Where Is Without Warranty" addendum with the agent. Seller should careless and should thank you a million. Lender could careless on this since it HAS the deed restrictions in the approval letter or other CC&R clause that prevent you to "flip" for profit within 30 days or doing a simultaneous double closing on the deal; unless your profit is within 15% of the buy and sell price and disclosed to the lender; then it may allow it.] Sincerely, Felix Liu, former bank Vice-president

However, if this is an REO then the bank sets the price and the terms of owner occupant or investor preference as buyer. Moreover, the bank could set the price 7 days before the foreclosure auction for MRB (minimum required bid). That is the time bank is legally allow to set and publish the price it wants for the house.

@Anthony Yannucci They generally have a requirement for a year in occupying the home on government owned foreclosures. If they discover your not occupying the home, they (the government) will go after you for fraud.  It is a big no-no.