Bank Owned Owner Occupant Requirement?

Buying & Selling Real Estate
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Bank Owned Owner Occupant Requirement?

Mike Smith
Tempe, AZ · Member since 2016 · 22 posts · 7 votes

I have a question for all the BP experts.

I am fully aware (and abide by) all owner occupant requirements when dealing with any type of government owned/marketed homes (HUD, Homepath, etc).

However - I ran across a new listing today that is simply bank owned (national lender) in which they are forcing a 14-day owner occupant only period.  Again, it is not a government owned/listed property - just a regular ole' bank.  

Is this typical?  Do investors actually adhere to these rules, if paying cash? I spoke with the listing agent today, who confirmed there is nothing placed on the title to prevent the buyer from re-selling the home.  I understand (and agree with) not engaging in mortgage fraud and not fibbing when buying a government owned home...but just a regular ole' bank?  I (myself) have never seen a bank force an owner occupant period.

Disclaimer:  I am not suggesting anyone should ever misrepresent or be deceptive...

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  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y

    Yes, there are multiple banks that do this now. 

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  • Mike Smith
    OP
    Tempe, AZ · Member since 2016 · 22 posts · 7 votes
    10y
    Thanks for the reply Mark Ferguson Love your podcast - btw. My question is - what's there to stop someone from saying they are an owner occupant and just avoiding the requirement? Especially if they have all cash. That means no mortgage fraud and it's not a government owned home so you aren't fibbing to the government...they confirmed no restriction to resell on the title... Also - what's the point of it? Banks assume they will get higher offers from the OO community?
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  • Julia Dugger
    Rental Property Investor · Jacksonville, FL · Member since 2015 · 60 posts · 27 votes
    10y

    As background, these are generally implemented for PR and government relations purposes. Like it or not, lenders and selling banks are overseen by government regulators who often prioritize owner occupants in policy decisions and talking points. It's in the banks' best interests to say that they give owner occupants a first shot at properties -- good for communities, neighborhood stabilization, etc. -- so I think they're probably here to stay. I know that many asset managers will do a quick property check on buyers before accepting an offer to see if they own anything else and confirm that the buyer is not an investor.

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  • Julia Dugger
    Rental Property Investor · Jacksonville, FL · Member since 2015 · 60 posts · 27 votes
    10y
    Originally posted by @Mike Smith:

    Also - what's the point of it? Banks assume they will get higher offers from the OO community?

     Owner occupants do typically bid higher -- often by several percentage points.

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  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y
    Originally posted by @Mike Smith:

    Thanks for the reply Mark Ferguson

    Love your podcast - btw.

    My question is - what's there to stop someone from saying they are an owner occupant and just avoiding the requirement? Especially if they have all cash. That means no mortgage fraud and it's not a government owned home so you aren't fibbing to the government...they confirmed no restriction to resell on the title...

    Also - what's the point of it? Banks assume they will get higher offers from the OO community?

     They are usually signing an affidavit that states they are occupying it. If they did not occupy it they would be in violation of the contract and committing fraud by signing that document. 

    I believe they do it to make the government happy. I am not exactly sure why, but maybe it has something to do with the foreclosure laws, bank bailout etc.  Banks have to go through a lot now to complete a foreclosure: offer short sales, loan mods, etc. SO even though the bank is not the government. There may be government restrictions in place that caus ethe banks to do this. 

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  • Mike Smith
    OP
    Tempe, AZ · Member since 2016 · 22 posts · 7 votes
    10y
    Julia Dugger Mark Ferguson Thank you both for the replies - I really appreciate it. Just because someone owns other property doesn't mean they don't intend to or will not occupy the newly purchased home. However, I get the point you are making. I also get the point of being in violation of the contract. But let's face it, that happens every day in all aspects of business (often times with little consequence). Just seems like not placing a title restriction on the property defeats the "intent" and "spirit" of the requirement. As I would doubt there is much research, investigation or follow up done by a bank months after a purchase is complete.
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  • Account Closed
    Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    Many people do not even occupy HUD homes that were sold as owner occupant. I have seen for rent signs in yards before the properties were even close on.

    If I did that, I would be fined the $200,000 plus, they would keep my money, plus they would take the house, plus put me in jail... but basically none of that ever really happens to people.

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  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y
    Originally posted by @Mike Smith:

    Julia Dugger
    Mark Ferguson

    Thank you both for the replies - I really appreciate it.

    Just because someone owns other property doesn't mean they don't intend to or will not occupy the newly purchased home. However, I get the point you are making.

    I also get the point of being in violation of the contract. But let's face it, that happens every day in all aspects of business (often times with little consequence).

    Just seems like not placing a title restriction on the property defeats the "intent" and "spirit" of the requirement. As I would doubt there is much research, investigation or follow up done by a bank months after a purchase is complete.

     The research is not done by the banks, but by other investors. There are a lot of watchdogs out there making sure they aren't losing deals to cheaters. 

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  • Mark Ferguson
    Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
    10y
    Originally posted by @Account Closed:

    Many people do not even occupy HUD homes that were sold as owner occupant. I have seen for rent signs in yards before the properties were even close on.

    If I did that, I would be fined the $200,000 plus, they would keep my money, plus they would take the house, plus put me in jail... but basically none of that ever really happens to people.

    HUD has a number you can call to report those people. They have prosecuted repeat offenders before. I am a HUD listing broker and have seen them cancel contracts, take earnest money and take away NAID numbers away from agents as well.

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  • Account Closed
    Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    @Mark Ferguson   I have reported people.  Two of the properties were in the middle of assemblages I was trying to complete.

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  • Mike Smith
    OP
    Tempe, AZ · Member since 2016 · 22 posts · 7 votes
    10y
    Thanks all - never thought about other investors. For the record I was not considering trying to bypass the rules but was more concerned with why others wouldn't. I just don't understand why banks don't place a title restriction (like HUD does). Thanks again everyone.
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