Anti-Flip Clause

[Ayo F.]

So I have read in many places and discussed with many attorneys about the 30 - 90 day anti - flip requirement for short sale acceptance.

However, has anyone ever bothered to question the banks legality for requiring this?

Can a seller or anyone tell you what to do with what you "own?"The bank does not own the property. They only approve that the seller sell the property for less than what is owed. That's all.

Its like me buying a Mercedes Benz and the dealer telling me that I cannot drive it for 90 days or I cannot resell it to a willing buyer!

Who gave the banks the power to dictate what you can do with a property that you own?

The only reason I haven't done it is that I haven't found a title company that will close such deals.

By the way, its not a fraud unless you used deceptive means in getting the lower price.

However, if the bank accepts a price and I find someone a week later who is willing to pay considerably more for whatever reason, then thats fraud? Just cos they lost some money.

I'm so happy for the foreclosure settlement deal. They can defraud everyone (the whole mortgage crisis, predatory lending, stated incomes to qualify people for loans, robo -signing, mortgage back security frauds e.t.c) and it all good as long as they are making money?

I say it is not legal for the bank to tell anyone what they can do with their property or how much they can sell if for.....

It would be nice to have some discussion around this by anyone ......

[Michael Quarles]

Kind of. I dont see the issue with the arms length... The trust is the buyer and the trust is the seller. The Borrower is never involved within the trust

[Bryan Moyers]

Would there be a way of assigning the contract on the property to another buyer prior to the sale? I would be disclosing that on the front end. When I put a contract on a property, I always use "Bryan Moyers and/or Assigns". This could be another buyer or just putting it under an LLC at closing.

[Curt Davis]

Vito, your strategy will not work. People need to understand there is only one way to make this happen.When a wholesaler buys a home like this you can not purchase with more then 120% into the home. Buying the home in your name and then quit claiming it into another entity does not work. Plain and simple, when you buy the home you will either have to sit on it for 90 days or if you buy using hard money you will need to use your personal cash or get an unsecured loan to make the repairs and then sell it for actual profit 90 days later. The tricks dont work people!!!

[Samuel Ksiazkieicz]

Am I missing something here (probably am because there are a lot of smarter people here than I), but everyone is talking about "banks requiring 90 day seasoning" etc. I just reread HAFA and that 90 days is clearly stated there, i.e. by the government?

(Preparing to be told I am a retard for missing something obvious)

[J Scott]

Originally posted by Samuel Ksiazkieicz:
Am I missing something here (probably am because there are a lot of smarter people here than I), but everyone is talking about "banks requiring 90 day seasoning" etc. I just reread HAFA and that 90 days is clearly stated there, i.e. by the government?

Seasoning and resale restrictions can come from many places. HAFA is imposing restrictions on resale like you said, but HAFA is just one type of short sale being done. Some short sales will have no resale restrictions, some will have 30 days, some 60 days, some 90 days and some 120 days.

In one case, the restriction was, "120 days, unless the purchaser does substantial renovations" -- of course it didn't define "substantial."

Sometimes the restriction on the side of the new purchaser (your end buyer). FHA used to have 90 day resale restrictions and some FHA lenders still impose them (though FHA itself doesn't).

You need to be aware of all the pieces of the puzzle and plan accordingly based on how you're buying and how you're selling.

[Samuel Ksiazkieicz]

j scott;
Thanks man. I guess that was kind of obvious, sorry about that.
A tangent on the HAFA stuff, included in it is the requirement that lenders must "develop a written policy that describes the basis on which their minimum acceptable proceeds are determined by". I imagine this is something they keep very close to their chest? If their policy were known then it would make it much easier for us to determine what to bid for their property.

[J Scott]

Originally posted by Samuel Ksiazkieicz:

A tangent on the HAFA stuff, included in it is the requirement that lenders must "develop a written policy that describes the basis on which their minimum acceptable proceeds are determined by". I imagine this is something they keep very close to their chest? If their policy were known then it would make it much easier for us to determine what to bid for their property.

In my experience, you can generally buy a HAFA-approved short sale for between 87-90% of the BPO price. And if the property sits for more than 60 days, that value drops to closer to 80% of the BPO price.

Just my experience...not necessarily typical for everyone/everywhere...

[William Bannister]

1st while I agree its pretty crappy for lenders to play this game with deed restrictions They are only screwing themselves. Here is why. The property stays on the market longer because some people like myself if I had planned on flipping it, that exit strategy is gone and my rehab anf flip might take 30 to 90 days depending on my motivation level. The deed restriction just reduces asset value to me as an investor. The more limited a use of property can often reduce that particular assets value.
How ever just the opposite can occur to the entire market place. The pipe line of the market fills up with these properties that have not really been brought back to the open market because they are stuck in limbo waiting to break out of a deed restrictions. When the restrictions lift they go back into market and just cause more supply and reduce demand. Its as though the banks are attempting to reduce supply all at once and trying to spread it out? It could also be just to attempt to stop fraudulent valuation of the asset too. What ever it is they have affected the assets value to a part of the market place...the investor.
My solution is to stay away from any deed restriction that is over 6 months. If a deed restriction is over 90 days i knock off 90 days of holding costs. For me its cheap because I pay cash for houses. I still factor it as though I had debt service because my money tied up costs me money. If a banker ties me up i penalize him by reducing my offer on his asset by 3 months of lost income on my money. Its a numbers game this banker plays and I just play his game right back and reduce my offer on his asset. I might not tell the realtor why my offer is 3k to 5k less. I also find myself pursuing other avenues for deals and just cutting banks out altogether. Buying tax deed property instead
Banks are only one conduit for deals. I can buy from government taxing districts or from owners as well. The banker hassle factor to me knocks 5% off price right away. If enough investors thought like I did bankers might think twice before devaluing there distressed assets further with deed restrictions. Its time for you all to use a scientific approach and keep in mind what these restrictions do to value..add holding costs...change and reduce exit strategy, hassle factor extra administrative costs trying to do the deal.

[J Scott]

Originally posted by William Bannister:

My solution is to stay away from any deed restriction that is over 6 months.

Where have you seen deed restrictions over 6 months?

So far, the longest resale restriction I've seen is 120 days on a Chase short sale.