Q on Bank Owned Sale with Owner Occupant Only Review Window

6 Replies

I am looking at purchasing a bank owned property in Kansas which is only reviewing owner occupied offers for the first week, and then will look at investor offers. What are the owner occupancy rules, e.g. could I sit on it for a year as a second home, and then rent it out after some time period? 

If I remember from reading up on this is you must live there for a year and 1 day, after that you can sell or rent out the property. If you submit an offer during owner occupancy only period and do not plan to occupy the home as your primary residence you are running a large risk and would recommend against it.

I've heard of investors that did this, then got told on by another investor that was looking at the same property. Once again I would recommend waiting unless you plan to live there for  a year at least.

Originally posted by @Dimple Khurana :

I'm paying all cash. So I'm unclear why there are rules for the purchase of the bank owned property. What are the penalties, and from whom? 

I'm not an attorney. I'm not giving legal advice. If you represent yourself as an owner occupier and purchase it and subsequently flip it without the intent to occupy it and get caught, it could be a crime. There are people sitting in prison for committing fraud with federally regulated financial institutions on real estate.

That you are even asking the question could be evidence enough of your intent NOT to occupy the property. Better not to misrepresent yourself as an owner occupier. You are obviously an investor and you have left a footprint substantiatin that all over the internet (At least on this board you have) so, it wouldn't be difficult for someone to allege misrepresentation of intent.

I'm not saying that's the case. Just saying be careful.

Oh, and to your other question(s). What are the penalties? Could be civil and/or criminal depending on the transaction. From whom? More than likely, a Federal entity. Imagine buying a HUD home (Feds) and lying on your purchase agreement about occupancy intent. What's the harm? They have a window for owner occupied buyers first, to promote home purchases to increase homeownership for those renting and you come in and represent yourself as one of them, and buy it, and then flip it for a higher price? One of those prospective buyers that could have bought it for "X", lost out to you and then you sell it for "Y" and that same person now has to pay "Y" for it, instead of "X". You starting to see the picture?

It depends on the institution, some will have you sign a form as part of the contract and others make you sign a form at closing.  Others have a deed restriction for 1 year.

Either way, you are stating the you will occupy the property as your principal residence for 1 year.  Enforcement is usually handled thru complaints from the other potential owner occupants or investors that missed out due the misrepresentations made by the buyer

you're right, i'm an investor. i'm not hiding that. i'm asking if i could sit on it for a year. asking about penalties out of curiosity and as a way to learn why these rules are in place and by whom. no ill intent, just knowledge.