Refinance deed restriction

[Account Closed]

I've heard it said here and elsewhere that banks sometimes have deed restrictions that in addition prohibiting resale, also prohibit refinancing for a period of a couple months after the purchase of an REO. Does anybody have an example the deed language used?

Specifically, I’m wondering what happens if a property is refinanced within that time period, does the owner take the hit or the lender? Could an unsuspecting private lender somehow lose the property as collateral for the loan?

[Chris Clothier]

Wayne Brooks - That is the way i read it as well and I too have no idea when it first was added to the addendum. We have seen some with the blanks left exactly that...blank! J Scott is probably one of the smartest guys I know in this industry and he really helped me get my arms around this last week when i was first informed about these encumbrance restrictions placed on the loans.

We have since talked to multiple different closing attorneys and title companies in 4 states and all seem to be confused about the intent and purpose when it comes to an investor who is rehabbing to flip. In fact, none of the attorneys or title companies had ever actually advised a client that they could not borrow at the closing table. None could recall seeing it filled in. I think it is going to be a mess as it is ensnaring companies and buyers and tying them up when that was not what it was intended to do.