can we resell an REO property which was affordable housing before

[Zhao Zhao]

Hi,

I'm a real estate investor and recently encounter a bizarre situation. I tried to search online for answers but was not able to find one.

The property locates at fairfax county, Virginia. It is an REO property owned by Freddie Mac and was onsale. I win the auction and is ready to move to purchase agreement. However, I found that it is a affordable housing unit before it was acquired by the bank. Affordable housing unit has less property tax, was sold to first time low income buyers at a lower than market price, and has restrictions on appraisal, etc. So my question is, since it is acquired by the bank and then sold on the auction market to me, do those restrictions still apply? The first time home buyer get an affordable property with some kind of subsidy from the government so it make sense for them to sell it with restrictions later. But as an investor, I did not get any subsidy when purchasing it, is there any restrictions on me when selling it in the future?

It is confused to me and hope anyone can shed some lights here.

Appreciate!

[Wayne Brooks]

That would be dependent on the restrictions contained within the bowels of the original program....it may or may not even be a deed restriction running with the property.

[Russell Brazil]

Yes the deed restrictions still apply to all future owners. Typical for the area the deed restrictions run with the property for 30 years. So even if you own it, you will still be subject to those restrictions, which could possibly mean you are forced to sell it if you do not qualify to own it.

[Zhao Zhao]

@Wayne, @Russel: thanks! I got a better understanding with your answers. If I'm forced to sell (I will anyway sell it for a flip), any restrictions on the price? Can I get a market price?

[Account Closed]

The Home affordable programs just like the USDA rural loans are tied to the borrowers income eligibility.  The borrower might get a grant reduced taxes etc  After foreclosure there would not be any restrictions on the deed other than the liens from the home affordable buyer.. The good news you would be free to sell it without restrictions and the good news the property would qualify for another buyer under the current home affordable programs ..  When you get your commitment for title insurance I would be surprised if there are any leftover deed restrictions @Zhao Zhao

[Russell Brazil]

Originally posted by @Zhao Zhao:

@Wayne, @Russel: thanks! I got a better understanding with your answers. If I'm forced to sell (I will anyway sell it for a flip), any restrictions on the price? Can I get a market price?

Yes the price will be limited to what the deed restrictions allow. The price controls are likely set by the county where it is located. Actual price will depend on what type of program the property is in. Expect sales price between 25-50% of market value for most affordable units in the DC area.

[Zhao Zhao]

From the official fairfax county ADU covenant documentation, upon foreclosure, the ADU related covenants will be released.

https://www.fairfaxcounty.gov/housing/sites/housing/files/Assets/documents/ADU%20Resources%20for%20Developers/For%20Sale%20ADUs/forsaleaducov.pdf

Any comments?