90 day no flip affidavit

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90 day no flip affidavit

Duane Ortega
Transactional Funder · Neptune, NJ · Member since 2011 · 187 posts · 86 votes

Hi everyone, just wondering if anyone has seen this 90-day no flip affidavit and what they are doing about it.

Thanks for any and all feedback,
Duane.

"Property flips occur when ownership of one property changes several times in a brief period of time. Property flipping becomes
illegal and a fraud for profit scheme when a home is purchased and resold within a short time frame at an artificially inflated
value. For the purposes of this statement, a short time frame is defined as a period extending ninety (90) days from the date of
the short sale transaction.
BUYER represents, along with BUYER real estate agent, that I/WE are not involved in a for profit scheme to flip the property and
that there are no current agreements, written or otherwise, to immediately re-sell the Property at a higher price, and that no
transactions of this nature will take place within ninety (90) days of the date of closing on the short sale transaction.
I/WE represent that there are no relationships between any parties involved in the transaction, including BUYER, SELLER,
FINANCING COMPANY OR INSTITUTION, NEGOTIATOR, or REAL ESTATE AGENT.
I/WE understand that any information associated with the short sale, may be made available to federal, state, and/or local law
enforcement agencies for such action within their jurisdiction as they deem appropriate if illegality related to this short sale is
discovered."

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Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
Originally posted by Donovan R.:
Wish I could, I don't have a buyer yet. This one is not going well :(
Your first mistake was locking up a property without having a large enough buyers list to have a buyer quickly. If you did, you could have made the offer in the name of a trust (I use the street name/address Trust - as the name) then you have time to form the trust after it is under contract and name your buyer as the bene at that time.

Mistake number two is that by not performing, you will likely damage the relationship between you and the list agent as well as potentially be named in the Wells Fargo black list - banks do flag those who do not perform or do other things they don't like, so if and when you make an offer on another, you may be flagged and as such, your offer ignored or not accepted.

Learning experience for you.

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  • Donovan R.
    Real Estate Investor · Columbia, SC · Member since 2010 · 59 posts · 23 votes
    15y

    What lender is this from? I was just going to ask a similar question. I have a short sale with Wells Fargo and they are making me take out a clause in my contract that "buyer intends to resell for a profit".

    I asked if they were planning on putting stipulations on my approval and didn't get a straight answer.

    Wells Fargo -
    "In regards to the “flipping” verbiage, I either need it removed, OR, I need it to also include an estimated date the repairs would be completed do it does not appear the flip would occur the same day as you close."

    My offer is in a trust and I need to wholesale this one out. Hoping this doesn't mess me up. Sorry if I Hi-jacked the thread, seemed related.

    0Reply
  • Duane Ortega
    OP
    Transactional Funder · Neptune, NJ · Member since 2011 · 187 posts · 86 votes
    15y

    This is from GMAC.

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

    Wells is one of several who institute such verbiage to not allow a buyer to imediately re-sell the property. You will have to follow the rule or not buy that property.

    If you use a trust to circumvent the rule, you must do it in such a way that the beneficiary does not change. The bene is the real owner and if you assign the beneficial interest, that would need to be recorded and as such, constitute a change in ownership. The correct way is to name your new buyer as the bene, you as the trustee, thne simply substitue the trustee for your buyer's choice - this is not a change in ownership.

    Podcast Guest on Show #130
    1Reply
  • Donovan R.
    Real Estate Investor · Columbia, SC · Member since 2010 · 59 posts · 23 votes
    15y

    Wish I could, I don't have a buyer yet. This one is not going well :(

    0Reply
  • Donovan R.
    Real Estate Investor · Columbia, SC · Member since 2010 · 59 posts · 23 votes
    15y

    I have to have everything in by 9/15. I guess if I don't have a buyer by then I have to let this one go?

    0Reply
  • Duane Ortega
    OP
    Transactional Funder · Neptune, NJ · Member since 2011 · 187 posts · 86 votes
    15y

    Will,

    The bene being the buyer is a good idea.

    However, don't you need the current owner to be the bene in order to satisfy the short sale bank that it actually hasn't been sold or conveyed to a different owner? Am I missing something?

    Thanks,
    Duane.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y
    Originally posted by Donovan R.:
    Wish I could, I don't have a buyer yet. This one is not going well :(
    Your first mistake was locking up a property without having a large enough buyers list to have a buyer quickly. If you did, you could have made the offer in the name of a trust (I use the street name/address Trust - as the name) then you have time to form the trust after it is under contract and name your buyer as the bene at that time.

    Mistake number two is that by not performing, you will likely damage the relationship between you and the list agent as well as potentially be named in the Wells Fargo black list - banks do flag those who do not perform or do other things they don't like, so if and when you make an offer on another, you may be flagged and as such, your offer ignored or not accepted.

    Learning experience for you.

    Podcast Guest on Show #130
    2Reply
  • Donovan R.
    Real Estate Investor · Columbia, SC · Member since 2010 · 59 posts · 23 votes
    15y

    I agree, I couldn't get a low enough BPO IMO. The agent(investor also) enthusiastically told me he could sell it for X amount. I think I'm done with short sales anyway. Too many rules and regs and too many hoops to jump through.

    0Reply
  • Maryann L.
    Specialist · MA · Member since 2009 · 858 posts · 306 votes
    15y

    Duane, I've seen this verbiage. Thankfully it was not on a property we were taking title too, however there are some WEIRD things in this language. #1 is it states "artificially inflated value" - I'm assuming that if it's sold within the range of the BPO price, then it's not artificially inflated, however the rest of the language is concerning. Our legal team was working on something last week regarding this type of language although I've been too busy to follow up. I'll see what I can find out and post back.

    0Reply
  • Kathy V.
    Involved In Real Estate · Rochester, NY · Member since 2011 · 138 posts · 11 votes
    15y

    I've seen that language too. BofA and WF, in my opinion, are the hardest to deal with. Especially with short sales. Too many headaches.

    0Reply
  • Alex K.
    Real Estate Investor · Sparks, NV · Member since 2008 · 45 posts · 28 votes
    15y

    I bought a property from Fannie Mae and there was a deed restriction saying I could not sell it for more than 20% profit for 3 months. To get around it my buyer and I made up a contract with a closing date 3 months from my buy date, and I'm renting it to him in the mean time. Not ideal but it works.

    Too bad we can't put in an addendum to the contract which states the bank is not allowed to make a profit.

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y
    Originally posted by Alex K.:
    I bought a property from Fannie Mae and there was a deed restriction saying I could not sell it for more than 20% profit for 3 months. To get around it my buyer and I made up a contract with a closing date 3 months from my buy date, and I'm renting it to him in the mean time. Not ideal but it works.

    Too bad we can't put in an addendum to the contract which states the bank is not allowed to make a profit.

    Be careful, if I am not mistaken and it has not since changed, there is also verbiage in that addendum that spells out that any lease contract with a new buyer is not allowed to get around the 90 day rule.

    As to your wish, I agree, unfortunately, since they hold title to the property you wnat, they hold all the cards and make all the terms, you either abide by them or tell them to take a hike (in which case, you don't get to buy it).

    Podcast Guest on Show #130
    1Reply
  • Maryann L.
    Specialist · MA · Member since 2009 · 858 posts · 306 votes
    15y

    Will you could be thinking of a short sale addendum, where the new buyer cannot rent to the old seller, but I was unaware of such language on an REO like Alex's. I could be wrong.

    0Reply
  • Keri Vaughn
    Jupiter, FL · Member since 2011 · 7 posts · 2 votes
    15y

    Hi Y'all...try to figure out who your investors are on the loans before you make your offers...if it's a Freddie or a Fannie you know you will have a 90 day, arms length etc...also, if the homeowner is going through HAFA there will be similar addendums. You can sometimes track down the investor by reviewing the original mortgage, or if the foreclosure has started you can see who filed it (it's usually not the servicer). When you look up the original mortgage you can see if there is a MIN# on the top right and if so go to the MERS number look up web site

    https://www.mers-servicerid.org/sis/

    Here is Fannie Mae:http://www.fanniemae.com/loanlookup/
    Freddie Mac:https://ww3.freddiemac.com/corporate/

    Knowing your players up front can help you avoid timely and costly delays or failure to close.
    Please note that you may need to put the address is multiple ways with Freddie and Fannie to get the correct results (particularly with condos etc.)...Lane, LN, Ln., apt.#3, #3, Unit 3, 3...etc..

    Second, I have to agree, if you don't have a legitimate buyer ready to go, your out of biz and your going to have some seriously upset people-these practices are what puts these deals on the radar for fraud. Besides defrauding the banks (as they view it), it's questionable if it's not defrauding the owner/seller who is not marketing his/her property and heading towards foreclosure. There are plenty of ways of doing biz above board.

    Third, besides the trust idea (some banks won't sell to a trust), on a non-government loan it's possible that if a buyer was going to convey the property TO a trust post closing but cannot immediately due to financing etc., this MAY be a viable reason with SOME investors (for the bank) to consider allowing it...I can't say that I have tried it but it's worth a try if it's applicable (of course I never reccomend lying or misleading statements so keep it consistent with your transaction).
    Hope this helps a little & good luck!
    Keri :)

    1Reply
  • Jessica B.
    Investor · Phoenix, AZ · Member since 2011 · 36 posts · 9 votes
    15y

    IMO, I would ask the bank to clarify that "artificially inflated
    value".

    If repairs are done to the property that would cause a natural increase in value, would this addendum still apply? What if it appraises at the new value? That would be the actual value of the house then... no?

    Maybe get them to let you add some wording to the end of it or on a new addendum that clarifies it so that if the house comps for the new value you're in the clear. I'd also mention to them at this point how much in repairs you're going to have to make to the property, and maybe send them a copy of the bids for work.

    If you can show them in writing from independent sources that the house needs $20k to be habitable, they might be more flexible with you.

    0Reply
  • Mike Morrison
    Contractor · Woodlands, TX · Member since 2010 · 95 posts · 18 votes
    15y

    Keri is correct.But trying to find out who the REAL note holder is takes a forensic abstract & securitization search. You are rolling the dice otherwise.What I've usually found is a broken chain of title which will come back & bite you hard. There are only about 60million of those floating around.

    0Reply
  • Jason S.
    Investor · Diamond Bar, CA · Member since 2009 · 446 posts · 233 votes
    15y

    I have read that you can file a QWR.

    QWR is a Qualified Written Request and per Respa regulations the lender MUST DISCLOSE to the homeowner who the investor is within 60 days of the request.

    Do not know if it is true or not - maybe someone more experienced can chime in.

    1Reply
  • Keri Vaughn
    Jupiter, FL · Member since 2011 · 7 posts · 2 votes
    15y

    It does take a lot of research but at least some research is better than none...and if it's Fannie or Freddie those are pretty easy to track down with the web sites. :)

    0Reply
  • Mike Morrison
    Contractor · Woodlands, TX · Member since 2010 · 95 posts · 18 votes
    15y

    Keri, take a look at the Freddie/Fannie Short Sale Addendum, Sec or Paragraph 13.This is a BIG DEAL along with the No Flip rule.
    We are going to run into title policy problems.Like trying to get a title policy. Here's a good post that lays it out.[url]

    0Reply
  • Keri Vaughn
    Jupiter, FL · Member since 2011 · 7 posts · 2 votes
    15y

    Right, that's my point Mike, find out who your players are and steer clear of ones that wont work in your biz plan, sorry if I wasnt clear in my rambling earlier lol...:)

    0Reply
  • Maryann L.
    Specialist · MA · Member since 2009 · 858 posts · 306 votes
    15y

    A QWR for just the investor info is VERY easy. I send in a one page request along with my authorization and they have 60 days to respond. BOA is actually really good about getting it to you in 30 days and sometimes the homeowner can call and just get the info for you.

    0Reply
  • Duane Ortega
    OP
    Transactional Funder · Neptune, NJ · Member since 2011 · 187 posts · 86 votes
    15y

    Thank you everyone for all the valuable feedback thus far :)

    Maryann, did your legal team make any headway?

    Thanks much,
    Duane.

    0Reply
  • NA Foster
    Real Estate Investor · CA · Member since 2009 · 174 posts · 39 votes
    15y

    Hey Will Barnard-I like all three of your posts-My check is in the mail!LOL

    0Reply
  • Jeff TumbarelloPro Member
    Real Estate Broker · Fort Myers, FL · Member since 2008 · 1k+ posts · 323 votes
    15y

    Just factor it into your holding costs and drive thru

    0Reply
  • Account Closed
    Rehabber · Member since 2011 · 66 posts · 9 votes
    14y

    What are the odds the lender is even paying attention once it's off their books? Is this affidavit enforced or just a formality on the lender's part?

    0Reply
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