Wells Fargo Short Sale Addendum

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Wells Fargo Short Sale Addendum

Alex Locklear
Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes

I am real close to getting a verbal approval from Wells Fargo on a short sale deal I've been working on.

Today they sent me a couple of more items they need to move forward; one was a "short sale contract addendum".

One of the terms in this addendum states:

"The parties agree that this short sale transaction will not constitute appraisal fraud, flipping, identity theft and/or straw buying".

I'm stuck. Surely people are buying and reselling wells fargo short sales. How do I get around this?

Thanks in advance for any help!!

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Scott Hubbard
Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
16y
Originally posted by Alex Locklear:

One of the terms in this addendum states:

"The parties agree that this short sale transaction will not constitute appraisal fraud, flipping, identity theft and/or straw buying".

I'm stuck. Surely people are buying and reselling wells fargo short sales. How do I get around this?

Thanks in advance for any help!!


This clause is added protections for the lender and their investor against schemes that could defraud them.

1. If the B buyer is actual individual or entity authorized using wet funds to close then there is no straw buying or identity theft.

2. If you have disclosed you are an investor and that you intend to make a profit and you have not colluded, influenced or coerced anyone to make false claims or actions, then it is not mortgage fraud.

Flipping on the other hand is where your going to run into problems.

Option 1. Courtesey of Justin S. of BP, you should e-mail the negotiator and request clarification of the "flipping" and reiterate your an investor that intends to buy and sell and your title company will not issue a title policy because the language in the SS addendum is too ambiguous. Say... you need to have the right to resell the property once your on title.

Hopefully, you will get a response saying it is okay to flip the sell the property or something similar.

Option 2. Send in the SS addendum signed with a written addition stating that your are an investor intending to make a profit and are invoking your rights to resell the subject property once your on title.

If they issue the approval letter, then they have accepted your additional provision.

The clause is, in my opinion, is intended to keep investors from doing simultaneous closings. However, due to its ambiguity, it has a side effect that keeps investors from doing back to back closings as well ans possible any reselling activity.

Any lawyer will telll you, once your on title, the former lender cannot dictate its policies. The problem is, not many of us will be on title long enough to excercise those rights becuase the titel comapnies, whom are in bed with lenders, are simply not going to issue title insurance becuase of the perceived risks.

Once you have obtained a response under one of the options above, take it to your title company to see if they will help you will a double close.


Option 3. If, after you have tried 2 and 3 to no avail, you could contact your attorney to have him right an opinion letter. This is expensive and has not worked out well for me.

Option 4. If using your own funds, you can use two separate title companies. One to close A to B and th other to close B to C. This came from my own attorney becuase, again, once your on title, they cannot dictate those restrictions.

Option 5. Go A to C and move on.
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  • Scott Hubbard
    Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
    16y
    Originally posted by Alex Locklear:

    One of the terms in this addendum states:

    "The parties agree that this short sale transaction will not constitute appraisal fraud, flipping, identity theft and/or straw buying".

    I'm stuck. Surely people are buying and reselling wells fargo short sales. How do I get around this?

    Thanks in advance for any help!!


    This clause is added protections for the lender and their investor against schemes that could defraud them.

    1. If the B buyer is actual individual or entity authorized using wet funds to close then there is no straw buying or identity theft.

    2. If you have disclosed you are an investor and that you intend to make a profit and you have not colluded, influenced or coerced anyone to make false claims or actions, then it is not mortgage fraud.

    Flipping on the other hand is where your going to run into problems.

    Option 1. Courtesey of Justin S. of BP, you should e-mail the negotiator and request clarification of the "flipping" and reiterate your an investor that intends to buy and sell and your title company will not issue a title policy because the language in the SS addendum is too ambiguous. Say... you need to have the right to resell the property once your on title.

    Hopefully, you will get a response saying it is okay to flip the sell the property or something similar.

    Option 2. Send in the SS addendum signed with a written addition stating that your are an investor intending to make a profit and are invoking your rights to resell the subject property once your on title.

    If they issue the approval letter, then they have accepted your additional provision.

    The clause is, in my opinion, is intended to keep investors from doing simultaneous closings. However, due to its ambiguity, it has a side effect that keeps investors from doing back to back closings as well ans possible any reselling activity.

    Any lawyer will telll you, once your on title, the former lender cannot dictate its policies. The problem is, not many of us will be on title long enough to excercise those rights becuase the titel comapnies, whom are in bed with lenders, are simply not going to issue title insurance becuase of the perceived risks.

    Once you have obtained a response under one of the options above, take it to your title company to see if they will help you will a double close.


    Option 3. If, after you have tried 2 and 3 to no avail, you could contact your attorney to have him right an opinion letter. This is expensive and has not worked out well for me.

    Option 4. If using your own funds, you can use two separate title companies. One to close A to B and th other to close B to C. This came from my own attorney becuase, again, once your on title, they cannot dictate those restrictions.

    Option 5. Go A to C and move on.
    8Reply
  • Maryann L.
    Specialist · MA · Member since 2009 · 858 posts · 306 votes
    16y

    Hi Alex!
    I just had this same thing happen with WF. Have your negotiator go back and "define" what they mean by flipping and just explain you do intend to resell the property for profit.

    The LM for WF came back and told me they just didn't want me actively selling the property when they hadn't approved the short sale. So, we waited and once we got approval, started marketing it.

    Good luck.

    2Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y

    Thanks Scott for the great reply!!

    Which option would you try first? Option 1 or option 2?

    I'm going to try option 1 and 2 and if neither of those work out, I guess I'm just going to go straight from A-C...

    0Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y
    Originally posted by smitnlit:
    Hi Alex!
    I just had this same thing happen with WF. Have your negotiator go back and "define" what they mean by flipping and just explain you do intend to resell the property for profit.

    The LM for WF came back and told me they just didn't want me actively selling the property when they hadn't approved the short sale. So, we waited and once we got approval, started marketing it.

    Good luck.


    AWESOME! This is good news. Thanks a lot guys (and gals!)
    0Reply
  • Audley Humes
    Real Estate Agent · Jacksonville, FL · Member since 2009 · 100 posts · 39 votes
    16y

    We've had Well's issue a 30 day no flip in our approval letter. Did the contract not state up front your intentions where to re-sell the property for a profit?

    In the past week, WF has rejected two of our Option Contracts. We've since created a Standard P&S Agreement with appropriate addedums/disclosures.

    Good luck!

    0Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y
    Originally posted by Audley Humes:
    We've had Well's issue a 30 day no flip in our approval letter. Did the contract not state up front your intentions where to re-sell the property for a profit?

    In the past week, WF has rejected two of our Option Contracts. We've since created a Standard P&S Agreement with appropriate addedums/disclosures.

    Good luck!


    It does state in the contract that I have the right to immediately resell for a profit.

    I used a standard P/S agreement with appropriate addendums. I don't think most banks like options anymore.

    I just sent the negotiator an email that stated:

    "Sounds great; I will get everything to you.

    Can you please define "flipping" in the contract addendum? I am an investor and I do intend to buy and resell for a profit.

    My title company will not issue a title policy because the language in the addendum is too ambiguous. I will need to have the right to resell the property once my name is on the title.

    Thanks for your help and clarification on this."

    I hope this was the right way to go about it..

    0Reply
  • Nick Reuter
    Real Estate Investor · Bradenton, FL · Member since 2009 · 99 posts · 42 votes
    16y

    Good luck, let us know as soon as you hear a response!

    0Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y

    The negotiator just emailed me with the following response:

    "if you are doing one of the items that is restricted then the shortsale cannot be completed but if not then the shortsale addendum has to be signed accordingly. thanks"

    0Reply
  • Chris G.
    Real Estate Investor · NowWhere, WI · Member since 2009 · 135 posts · 25 votes
    16y
    Originally posted by Alex Locklear:
    The negotiator just emailed me with the following response:

    "if you are doing one of the items that is restricted then the shortsale cannot be completed but if not then the shortsale addendum has to be signed accordingly. thanks"


    Hmmm. That doesn't seem like it really clarified anything.
    0Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y

    No it doesn't at all.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    You need to ask the negotiator to define "flipping".

    Further, you need to notify them, preferably through your attorney, that once you are on title, they have NO legal grounds to tell you what you can or cant do with your own property.

    Flipping could mean buying, fixing, and selling 9 months later. Since the verbiage in this specific addendum is so vague and ambiguous, it is necessary for the negotioator to define it.

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    5Reply
  • Michael Quarles
    Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
    16y

    Great conversation

    I have completed doubles with First American Title with that addendum... Maybe its because of the agreement I use... Or maybe its because the language is so vague... I am not certain it matters that they explain their position or not...

    Try inserting the following into your agreement

    XV. RESELL: Seller authorizes the Buyer to enter into a sales agreement to resell the property during this escrow period. Seller is aware that Buyer intends on reselling the property for a HUGE PROFIT. All profits made by Buyer during this transaction relating to the reselling of the property are the sole interest of and solely owned by the Buyer.

    XLV. OTHER AGREEMENTS: No prior or present agreements or representations shall be binding upon any of the Parties hereto unless incorporated in this Contract. No modification or change in this Contract shall be valid or binding upon the Parties unless in writing, executed by the Parties to be bound thereby.

    XLVII. MARKETING: Seller authorizes Buyer to market property during escrow for Buyers benefit. Marketing is defined as, but not limited to, placing the property for sale in the Real Estate Multiple Listing Service (MLS), advertising in the Newspaper or other periodical, and placing a for sale sign on the property.

    2Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y

    I'm thinking of just adding a written addition to their addendum that states I have the right to resell once I'm on title. If they give me approval, I guess that means they accept it.

    I have asked the negotiator to define flipping and he has not returned my email. The deadline to keep the file open is today (he only gave me 1 day) so if I don't hear from him in the next hour or so, I'm just going to have to send it in with an addition attached...

    I just don't understand lenders.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y
    Originally posted by Michael Quarles:
    Try inserting the following into your agreement

    XV. RESELL: Seller authorizes the Buyer to enter into a sales agreement to resell the property during this escrow period. Seller is aware that Buyer intends on reselling the property for a HUGE PROFIT. All profits made by Buyer during this transaction relating to the reselling of the property are the sole interest of and solely owned by the Buyer.

    XLV. OTHER AGREEMENTS: No prior or present agreements or representations shall be binding upon any of the Parties hereto unless incorporated in this Contract. No modification or change in this Contract shall be valid or binding upon the Parties unless in writing, executed by the Parties to be bound thereby.

    XLVII. MARKETING: Seller authorizes Buyer to market property during escrow for Buyers benefit. Marketing is defined as, but not limited to, placing the property for sale in the Real Estate Multiple Listing Service (MLS), advertising in the Newspaper or other periodical, and placing a for sale sign on the property.
    The problem with this is that the addendum trumps the PSA and teh bank will certainly not agree to this language, otherwise, they would take their own language out. These suggestions make no sense as they have no chance of getting apporved by the selling bank.
    Podcast Guest on Show #130
    1Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y
    Originally posted by Michael Quarles:
    Great conversation

    I have completed doubles with First American Title with that addendum... Maybe its because of the agreement I use... Or maybe its because the language is so vague... I am not certain it matters that they explain their position or not...

    Try inserting the following into your agreement

    XV. RESELL: Seller authorizes the Buyer to enter into a sales agreement to resell the property during this escrow period. Seller is aware that Buyer intends on reselling the property for a HUGE PROFIT. All profits made by Buyer during this transaction relating to the reselling of the property are the sole interest of and solely owned by the Buyer.

    XLV. OTHER AGREEMENTS: No prior or present agreements or representations shall be binding upon any of the Parties hereto unless incorporated in this Contract. No modification or change in this Contract shall be valid or binding upon the Parties unless in writing, executed by the Parties to be bound thereby.

    XLVII. MARKETING: Seller authorizes Buyer to market property during escrow for Buyers benefit. Marketing is defined as, but not limited to, placing the property for sale in the Real Estate Multiple Listing Service (MLS), advertising in the Newspaper or other periodical, and placing a for sale sign on the property.


    Michael--

    I have this in my contract:

    "SELLER hereby grants the Buyer and or their representatives all of the necessary rights to immediately list
    for sale, market, negotiate and enter into a contract to lease or sell immediately to a third party for a profit.
    All documentation in connection with the foregoing will be made available at the request of all Lenders,
    Sellers, and Buyers involved in the transaction."

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    Again, the problem is teh banks (Wells Fargo's) addendum which trumps the original contract. Their addendum specifically states you can not "flip" and thus, you have a problem.

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    0Reply
  • Doug Haisten
    Mobile, AL · Member since 2010 · 238 posts · 44 votes
    16y

    When faced with a situtation such as Alex's and banks that have dug their heels in on the flipping wouldn't the most expeditious course of action then be to go right to the A-C and get a fee from C.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y
    Originally posted by Doug Haisten:
    When faced with a situtation such as Alex's and banks that have dug their heels in on the flipping wouldn't the most expeditious course of action then be to go right to the A-C and get a fee from C.
    Yes, but could depend on your C buyer and their lender. Do they have teh cash to come to the table for your "fee", if not, will it be financed thorugh their lender? - Probably not.

    The other hurdle is - you are the buyer right now and getting that changed to the C buyer could also be a problem and could start the process all over again.

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    2Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y

    Right, and I have not even begun marketing for the C buyer yet. I was waiting for verbal approval to start marketing.

    0Reply
  • Scott Hubbard
    Rehabber · Tucson, AZ · Member since 2008 · 1k+ posts · 802 votes
    16y
    Originally posted by nationwidepi:
    Again, the problem is teh banks (Wells Fargo's) addendum which trumps the original contract. Their addendum specifically states you can not "flip" and thus, you have a problem.


    I have yet to see the actual addendum, is it part of the approval letter?
    0Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y

    I have not received approval yet, but I believe I would get approval once this is submitted.

    It is called "Short Sale Contract Addendum".

    0Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y

    I just called wells and think cleared everything up.

    The person I spoke with said the "flipping" verbage was to insure the seller (person short selling) wasn't going to turn around and make a profit some how on the property they were having to short sale...

    0Reply
  • Chris G.
    Real Estate Investor · NowWhere, WI · Member since 2009 · 135 posts · 25 votes
    16y
    Originally posted by Alex Locklear:
    I just called wells and think cleared everything up.

    The person I spoke with said the "flipping" verbage was to insure the seller (person short selling) wasn't going to turn around and make a profit some how on the property they were having to short sale...


    Awesome, now to just get that cleared up so you can get your title company on board.

    Good luck!
    0Reply
  • Alex Locklear
    OP
    Investor · Cary, NC · Member since 2008 · 218 posts · 29 votes
    16y

    Hopefully this clears up things for others getting the same addendum!

    0Reply
  • Michael Quarles
    Flipper/Rehabber · Bakersfield, CA · Member since 2008 · 3k+ posts · 3k+ votes
    16y

    nationwidepi

    I love being told something I do cant be done... Remembering I doubled it with title insurance. Heck their silly approval letter actually said I couldnt resell for 30 days... whatever...

    When clearly it can... Besides we the buyers are not a party to the conditions of the borrow nor the borrowers lender... The lender cant create a deed restriction for the buyer.

    I simply use the paragraphs in every contract so everyone is aware that I am going to flip the thing.. AND make HUGE profits...

    1Reply
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