Real Estate Investor · SPRING HILL, FL · Member since 2009 · 12 posts · 0 votes
Since they instituted a clause in their approval letter that says they will rescind the short sale transaction if the property is resold within 30 days . This is provision # 10 in their short sale approvals which is policy they adopted from countrywide when they acquired them.
If you have your title agent or attorney challenge this verbiage, BOA/COUNTRYWIDE will usually replace # 10 with a new clause that is even more broad based and prohibitive for flips/resells.
has anyone else experienced this? , or challenged this successfully?
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
16y
Originally posted by H Mann:
I offered 275k on a BofA property. They countered with 370k, which I'm guessing is their BPO.
What do I counter back at? 80% of that? 82%?
I agree with Will... You need to know how much the property will sell for quickly. This is where your listing agent should be helping.
Secondarily, you cannot assume BOA is countering at the BPO valuation. BOA does not always counter at the BPO. Sometimes they counter above, at or below. Where did your market analysis say the FMV is? Assuming the BPO came in at $370K, is that accurate? What are distressed comparables selling for?
Thirdly, it is a fallacy that lenders will automatically discount up to 80% of the BPO.
Instead, substantiate your offer with anything that shows they will NET less as a foreclosure than would by selling to you. At what discount to FMV do homes sell for at the courthouse steps? How much have REO comps sold for? How much is the average foreclosure cost in your area. What are the carrying costs? Does the property need any repairs?
You need to know what it will cost them to foreclose an how much they can expect to NET as a result. After all, this is the formula they base their decisions on.
Lastly, based on your numbers and adding extended financing via Will and 6% commissions, closing costs, a 5% price discount to the end-buyer, then 80% is probably a loser. I think you would be leaving a lot of money on the table if you settled for 80% of BPO.
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
17y
If you present yourself as an investor, you can bet there will be a clause. On the otherhand, you can still portray yourself as a retail buyer and still have the 30 day clause in the approval letter.
One of the questions I will get from the negotiator is "do you plan to live in the property?" Guess what your answer should be?
Also, if your name is on the contract and your negotiating the short sale yourself, play dumb and do not act like you have done this before.
There is no way I have found to get around this clause except to avoid it alltogether. One thing I can tell you is that the 30 days clause is not boilerplate.
Good Luck!
Real Estate Investor · SPRING HILL, FL · Member since 2009 · 12 posts · 0 votes
17y
tHANKS SCOTT
I KNOW SOME INVESTORS ARE NOW CUTTING TO THE CHASE BY PUTTING THEIR INTENTIONS TO RESELL FOR A PROFIT ON THE 1ST PAGE IN BOLD RATHER THAN WASTE 3 MONTHS AND THEN GET THE LENDERS PROHIBITIVE CLAUSE.
THESE BANKS TAKE THE BAILOUT $, DONT LEND THIS $, HOARD THE $, RARELY HELP THE HOMEOWNER, WASTE TAXPAYER $ , AND CLOG THE MARKET BY INCURING FURTHER COSTS TAKING IT TO FORECLOSURE.
Real Estate Investor · ten mile, TN · Member since 2009 · 1k+ posts · 374 votes
17y
Eric: Be very careful of the caps.
We know it was unintentional based upon the small t to begin the first sentence.
But I for one have never liked BOA or Contrywide since they began giving illegal aliens preferential treatment in their loans.
If this was truly not the case, it surely seemed like to many americans who could not get the loans given to those who could not prove the things that we had to prove.
Real Estate Investor · SPRING HILL, FL · Member since 2009 · 12 posts · 0 votes
17y
jawsette: Probably best to avoid BOA/Countrywide short sales while these clauses remain. Ken lewis getting a lot of heat in washington-maybe things will change if he is forced out.
Real Estate Investor · ten mile, TN · Member since 2009 · 1k+ posts · 374 votes
17y
That was the point in bringing that up for everyone as the writing was on the wall for a long time before the short sales became popular as it was true with other loans as well.
Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
17y
If you present yourself as an investor, you can bet there will be a clause. On the otherhand, you can still portray yourself as a retail buyer and still have the 30 day clause in the approval letter.
One of the questions I will get from the negotiator is "do you plan to live in the property?" Guess what your answer should be?
______________________________________________________
I'd like to warn everybody who think they can make a untruthful statement, especially with this question. There are more ramifications to this then a specific clause, such as preferable interest rate, and others. Give the wrong answer and you can be charge with fraudulent borrowing practice.
Real Estate Investor · SPRING HILL, FL · Member since 2009 · 12 posts · 0 votes
17y
The lenders(Many who don't read the contracts we send them )may ask the question regardless. They like to know what we are going to do with the house even though it's none of their business when we close with our own cash funds.
Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
17y
Eric.
That is a wrong assumption. Lenders ask the question because there are different rules governed by certain laws that differentiate between an owner-occupied and an investor. Also the terns and conditions are different.
Real Estate Investor · SPRING HILL, FL · Member since 2009 · 12 posts · 0 votes
17y
Eddie:
I'm aware of the various owner occ/non owner occ rules. I started this post because certain lenders don't want investors re-selling the short sales they close on within 30 days.
These particular banks are hurting the homeowners by not allowing investors to do the short sales and allowing the property to be foreclosed instead. this 30 day clause also also halts free market capitalism, and keeps the market clogged with houses and slows the housing recovery..........
Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
17y
Eric
Many of those rule were put in place to prevent fraudulent practices. You may argue that those rules are draconian, don't serve the purpose, or hurting the market but that doesn't change the fact that those rule are still the rules. Falsifying information or make false statement on a loan application can get you in trouble.
Real Estate Investor · SPRING HILL, FL · Member since 2009 · 12 posts · 0 votes
17y
Eddie
Those rules would serve a purpose if they would target only those commiting the fraud( the dry close. the pass thru funding from the end buyer to the b buyer,etc.) these rules however should not be applied to all as all are not commiting the fraud. the ethical investor who wants to re-sell short sales who closes using their own funds in a fully disclosed ,fully transparent stand alone transaction with their own escrow should be able to re-sell 5 minutes later if they choose.
Real Estate Investor · ten mile, TN · Member since 2009 · 1k+ posts · 374 votes
17y
As much as I dislike the practices of BOA which began several years ago, even before the foreclosure crunch.
I hate those who protray themselves as one thing when they do/are another. It is always the best thing to be straight and above board with everything. This does not stop anyone from doing business, it only stops many from hiding where the funding is comming from, like back in the old carteel days where business were used to launder money. It has many, many advantages that far outweigh the delay.
There is another way they can do things which is a harsher step that some are beginning to consider. And that is a deed restriction that required this property to be held by the purchaser for XXX period of time before selling or the sale is voided. This has the posibility of affecting all future owners of the property, not just you.
Real Estate Investor · Murrieta, CA · Member since 2009 · 47 posts · 23 votes
17y
As Scott has mentioned, this is on a case-by-case basis, usually at the negotiator's discretion (bank). I spoke to an escrow company that does a lot of double escrows for short sales and a really good point that was brought up is that this isn't set in stone and one thing you can do is to ask, how much will it cost to make this contingency go away. In other words, maybe we'll have to eat into our profits on BofA deals until they stop this as a common practice. But at least there is a chance to get this waived, especially since there are so many BofA/Countrywide short sales out there.
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
17y
Originally posted by jawsette:
There is another way they can do things which is a harsher step that some are beginning to consider. And that is a deed restriction that required this property to be held by the purchaser for XXX period of time before selling or the sale is voided. This has the posibility of affecting all future owners of the property, not just you.
Although this type of deed restriction is placed on some REO transactions, it's not such a sure tthing with a short sale. The REO is owned by the lender, so when they produce the new deed, they can put that restriction in there. The short sale is NOT owned by the lender, so the lender is not producing the new deed. Sure the lender might stipulate that this sort of restriction must be put in place on the short sale or else, but they don't have that same level of control as in REO.
And depending on how that restriction is written, it may or may not affect future owners. I would think that it would be far too restrictive to dictate that each subsequent owner must hold title for the specified term, and the purchaser (meaning you) should fight anything that overly restrictive.
Real Estate Investor · ten mile, TN · Member since 2009 · 1k+ posts · 374 votes
17y
Look back to the first post and you will see that we are talking about an investor doing a short sale from a bank. The bank being the owner this is an REO and you will have no recourse against any such provision that they decide to put in the deed.
The lender does not matter in this equation unless you also choose the same bank.
You are correct that sometimes a lender will try to put this type of clause upon the condition of recieving their monies, but that is not a restriction upon the deed itself.
Real Estate Investor · SPRING HILL, FL · Member since 2009 · 12 posts · 0 votes
17y
Hello Minna
After talking with several title company's it appears in most of the approval letters, but not all. the title company can respond by saying they cannot insure the transaction or obtain title insurance with that clause in the letter. also they may add "were not in a position to monitor the actions of the buyer after the closing". If all else fails I suggest writing your representative specifically the ones on the financial oversight panel that grilled ken lewis, and explain how BOA is prohibiting short sales with these clauses.
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
17y
Originally posted by Minna Reid:
So is this boilerplate for BOA, or no? I have two I'm working on now for investors and a clause like that would be a real killer.
I can say that this was not boilerplate as of the beginning of last month. I believe an investor can avoid this clause given they do not boldly represent themselves as investors! That is my philosophy.
Remember, it is not like BOA is trying to stop investors from buying properties, they are just trying to stop those investors who cannot perform. Investors who can close with their own funds will have less of a problem with this clause.
As for misreprentation, I am not encouraging anyone to outright lie to any financial institution about material information. A lender on the sell-side of the transaction has no material reason to be know what the purchaser does for a living. Their decision should be purely based on market analysis, loss tolerances, and congressional hearings!
Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 633 votes
17y
Do you think the type of contract used would make a difference as to whether the lender will issue such a clause? This particular buyer likes to use an option contract with full disclosure of the buyers right to resell, market, etc?
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
17y
Minna-
I think it matters which type of contract the buyer uses. Some lenders do not care, but I would rather not represent myself as an investor if I did not have to.
Recently, I have received several approvals from various lenders and the only one that came back with any restrictions was B of A.
I used to be able to get around the clauses by appealing to the negotiator at BoA. However, it is no longer negotiable and is placed on all approval letters so I am told.
Expect to have to close with your own funds on BOA deals.