REO owner occupant bidding period enforced?

23 Replies

This Question is about purchasing from Private Commercial Banks with cash. 

I want to be clear.NO purchases from government agencies and Cash Purchase Only . This question is About cash REO purchases from a private bank.

OK the Question

I see a number of banks these days listing REO properties with owner occupant bidding periods and selling, Most of these properties are not even habitable and say that the buyer must agree make the property their primary residence as soon as possible. I know investors are buying these in the owner occupant period. I have yet to see any law that says they have to follow this agreement. Assuming there is no deed restriction how could the bank even enforce these vague agreements? If the buyer flipped or rented the house within a year I suppose the bank could sue but what damage would they sue for since they were paid in full. I suspect these periods are just for PR?

I'm fairly sure that LYING on a Purchase Contract is considered FRAUD.

And I'm also fairly sure that there ARE penalties that can be pursued, if sprung.

Their prosecuting evidence? THIS thread! Having said that, I've no idea what recourse they could/would take.

Best advice I can give: Ask THEM! My 2c...

There are certainly laws, and penalties, for the gov't backed and big bank purchases.....don't be kidding yourself.  A small private bank usually will Not have this restriction.....the big banks have to do it as part of the spanking they got in the whole settlement deal with the Feds.  But hey, feel free to ignore it if you want.

Originally posted by @Charles Borrelli :

This Question is about purchasing from Private Commercial Banks with cash. 

I want to be clear.NO purchases from government agencies and Cash Purchase Only . This question is About cash REO purchases from a private bank.

OK the Question

I see a number of banks these days listing REO properties with owner occupant bidding periods and selling, Most of these properties are not even habitable and say that the buyer must agree make the property their primary residence as soon as possible. I know investors are buying these in the owner occupant period. I have yet to see any law that says they have to follow this agreement. Assuming there is no deed restriction how could the bank even enforce these vague agreements? If the buyer flipped or rented the house within a year I suppose the bank could sue but what damage would they sue for since they were paid in full. I suspect these periods are just for PR?

 I would ask the investors  you say know who are buying during the owner occupant period 

Need for owner occupancy time on a paid off property? Interesting. “As soon as possible” is a debatable statement. What i believe the bank is doing is protect their behind and put clauses like that because it is mandated, or legal is probably making extra overlays.

@Charles Borrelli I can't recall if I've seen a post from you regarding REO's or not so I'll reiterate what I've told a few people on this subject. I buy the REO's during this owner occupant period, but I move into them for the required timeframe as my primary residence. @Manolo D. @Michael Plante have both touched on the thing you may not be aware of, Every REO that I've purchased during the OO period will have the following requirements as a part of the sales package regardless of how you pay for the property, cash or financing. 1) You will be required to sign a sworn affidavit stating you will be using the property as your primary residence. 2) You will have to sign the affidavit stating you agree to be moved into the property within 60 days of the closing settlement date. 3) You will sign stating you will not sell or rent the property before the one year point from the settlement date. At the bottom of the affidavit it states if you violate any the aforementioned things you're committing mortgage fraud and will be federally prosecuted if it is determined you violated these terms. There are federal Hotlines for people to report possible fraud by investors in this arena. I've bought several REO's as OO, but I've only been aware of someone checking on me after the purchase once, It may have been more but once was obvious. Luckily I'm not dumb or a gambler who'll risk committing a Felony just to get a property so I was ok when the woman showed up at my property. If you really want the property just move into the property before the 60 days and do your 10 months in the property then sell or rent it at the 12 month period, this is what I do and it isn't that complicated.
Originally posted by @Ray Johnson :
@Charles Borrelli I can't recall if I've seen a post from you regarding REO's or not so I'll reiterate what I've told a few people on this subject.

I buy the REO's during this owner occupant period, but I move into them for the required timeframe as my primary residence.

@Manolo D. @Michael Plante have both touched on the thing you may not be aware of, Every REO that I've purchased during the OO period will have the following requirements as a part of the sales package regardless of how you pay for the property, cash or financing.

1) You will be required to sign a sworn affidavit stating you will be using the property as your primary residence.

2) You will have to sign the affidavit stating you agree to be moved into the property within 60 days of the closing settlement date.

3) You will sign stating you will not sell or rent the property before the one year point from the settlement date.

At the bottom of the affidavit it states if you violate any the aforementioned things you're committing mortgage fraud and will be federally prosecuted if it is determined you violated these terms.

There are federal Hotlines for people to report possible fraud by investors in this arena.

I've bought several REO's as OO, but I've only been aware of someone checking on me after the purchase once, It may have been more but once was obvious. Luckily I'm not dumb or a gambler who'll risk committing a Felony just to get a property so I was ok when the woman showed up at my property.

If you really want the property just move into the property before the 60 days and do your 10 months in the property then sell or rent it at the 12 month period, this is what I do and it isn't that complicated.

 Why did you tag me?

The OP said he knew investors where buying I said I would ask them

I am aware of the rules

Have bought direct my investor time and now have a contract to purchase made during resident as it will be my primary home 

Ok specifically what federal statute allows for prosecution? This seems like a rather tort

Sorry for missing this the first time, How can you commit mortgage fraud in a cash sale

It's the affidavits that everyone is worried about. Realtors sign it also. My personal opinion is that it should not matter what you do with it after you buy it. (It used to be that way in a country called the USA. hasn't been in a while) I also know of a couple of different investors who are buying in their kids, or nephews name's. Not sure if they are moving in or not? I have gotten deed restrictions (90 day / 20%) on the last 2 foreclosures I purchased. Neither were hud/va. 1 was normal foreclosure, 1 was reverse mortgage foreclosure. They should just add a deed restriction, and let the high bid prevail! Just my 2 cents....
Originally posted by @Charles Borrelli :

Sorry for missing this the first time, How can you commit mortgage fraud in a cash sale

Banks/Owners can make up their own rules for Bidding. And if one of their RULES is: "Thou shalt wait until owner-occupier bids get the chance to be accepted by us, BEFORE we accept Investor bids at the beginning of next month", and you PRETEND you'll be an owner-occupier because you don't want to wait that long, then I'm sorry - that's FRAUD!

    Brent did you read the question? What I asked was how is that mortgage fraud as Ray had mentioned thus a federal crime? With all the caps it seems the question rather ruffled you. The question is theoretical and no knowledge or question is ever bad. Its not meant to offend anyone. BTW its been my experience that normally when you start yelling others become adversarial towards you and stop listening.  This forum is meant for people to share knowledge about real estate investing. Questions should be asked and answers should be questioned, The end product is often the truth

I have purchased a lot of properties to flip but its been a long time since Bank REO's were a deal here. Hedge funds purchased all of them and drove up properties years ago. We buy them through private leads and occasionally buy HUD Fannie Freddie but those are purchased in the investor periods.

Recently I was looking at one REO for a home for myself because I love the area its in but I need to renovate it first and I'm not sure anyone could move into that house in 60 days. Permits take months since the hurricanes devastated us here.

Ray thank you for sharing your experience. If I may ask, the time you were checked on did you finance the property or did you pay cash?

@Charles Borrelli I financed the property through Wells Fargo, I signed an OO affidavit with Wells Fargo as a part of the underwriting process, and Bank of America the REO asset owner asked me to sign an OO affidavit as well before they accepted my offer.
@Charles Borrelli to bring more clarity to the conversation, the two affidavits were different, the one from the bank underwriter was two fold, it covered the OO financing rate and the OO required period, the affidavit from BofA was strictly covering the 60 day and 12 month requirements. I understand your concern about the 60 days not being enough time to get the property move-in ready. What I've done in the past is get all of my contractor quotes, materials ordered and scheduled, permits and applications started before I closed. I essentially use my escrow period to make sure I have enough time to meet the 60 day mark for occupancy. I use a very good investor friendly realtor who doesn't mind constantly going to the property so I can obtain quotes from the trades.

Brent here is your message.. My question very clearly asks about mortgage fraud and you gave the wrong answer because you answered without reading the question. Sorry I just gotta call bs on ya. Its not that big a deal and not worth debating further

Brent Coombs Investor from Cleveland, Ohio

replied about 14 hours ago

Originally posted by @Charles Borrelli :

Sorry for missing this the first time, How can you commit mortgage fraud in a cash sale

Banks/Owners can make up their own rules for Bidding. And if one of their RULES is: "Thou shalt wait until owner-occupier bids get the chance to be accepted by us, BEFORE we accept Investor bids at the beginning of next month", and you PRETEND you'll be an owner-occupier because you don't want to wait that long, then I'm sorry - that's FRAUD!

Thank You Ray that's very helpful. I assume the affidavit was at closing and or on the loan application?

@Charles Borrelli , why your beef with me? When you wrote: "I know investors are buying these in the owner occupant period", it was VERY clear that you knew THEY were lying (and likely getting away with it), so you were CLEARLY asking: Why can't I lie too? And what will stop ME from getting away with it?

Hence, my earlier responses. I agree: nothing to do with MORTGAGE fraud, but fraud nevertheless.

You want the Bank to accept your (Owner-Occupier) Bid under FALSE pretences - with impunity! Good luck with that...

Brent. The questions are fair and your answers are cynical and judgemental ( As are a lot of the answers you give on these forums.) You really are a bit of a troll and you love to emphasize  with caps . Your first answer was not particularly useful which is why I ignored it. In your second answer all you did was parrot your first statement without reading the question. Again I'm calling BS on you. You did not say you agreed it had nothing to do with mortgage fraud until your third and also useless statement which was simply for argument sake. 

I haven't purchased a bank REO for 4 years (because the REO deals all suck around here) and you assume by the question I'm trying to defraud a bank. The more angry you become the more ludicrous you draw your conclusions. I was taught to always stand up to a bully. That is my beef with you

Signing an agreement with no intentions of upholding your part just seems unethical to me.  It's an AGREEMENT.  The legal stuff doesn't always matter.  

Meaning legal isn't the issue - the issue is ethics.  I'm old fashioned, I believe we should all try to uphold our agreements and responsibilities.  

Good question. I have no idea if anyone is actually following up on the bank REOs that have been sold to owner occupants. As someone stated earlier the only reason banks are going this route is because of a settlement with the federal government as part of the bailout agreement. I'd assume the big banks need to cover their butts in these cases but who knows if big brother is watching/checking. 

I actually bought my personal home through this route. Was owned by Wells Fargo. I paid cash as I doubt anyone would have provided financing due to the condition. Most would have considered it uninhabitable but I actually moved in within days of closing and started working on it. I've been in it for close to 2 years now so I met the OO period easily. it's been a great purchase.

I think the oo period is only a year but I suppose it depends on the contract at the time of closing

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