Real Estate Investor · San Juan, Puerto Rico · Member since 2008 · 50 posts · 1 vote
My partner and I are ready to sign off on a contract. Its a Fannie Mae foreclosure. Its being sold through an agent with a management company.
We just got the contract and article 14 has a deed restrictions. It basically states that the grantee is "prohibited from conveying property to a purchaser for three months from the date of the deed.
Are they basically stating that we have to wait three moths after we close before we can retail the property to our buyer? Has anyone else seen this before.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
Originally posted by Gregory Rankel:
I have just started looking into the why behind this deed restriction...
The "why" you would get if you asked the banks is that they are trying to discourage unethical investors who are looking for a quick buck from buying, doing low-quality renovations and quickly reselling to unsuspecting owner occupants.
That may be true. It's also likely true that the banks don't like the fact that individuals have the opportunity to profit (sometimes greatly) off of their non-performing assets, and they are trying to limit the ability of private citizens gaining on their loss.
Obviously, I would never expect anyone in bank management to admit this.
...and I plan on finding the 'who' in this process who has authority to rethink the logic.
It's less logic and more ego/emotion. I'm quite certain those who make these decisions understand the impact; I'm also quite certain that they have no desire to change the process.
Real Estate Broker · Fort Myers, FL · Member since 2008 · 1k+ posts · 323 votes
17y
Originally posted by Ivan Reyes:
My partner and I are ready to sign off on a contract. Its a Fannie Mae foreclosure. Its being sold through an agent with a management company.
We just got the contract and article 14 has a deed restrictions. It basically states that the grantee is "prohibited from conveying property to a purchaser for three months from the date of the deed.
Are they basically stating that we have to wait three moths after we close before we can retail the property to our buyer? Has anyone else seen this before.
Thanks.
Ivan
This is common is some areas. Is the develpment new? That the REO is in?
You are reading it correctly, make sure it applies to everyone, their might be a clause that states, this applies if the deed is conveyed by the developer
Denver, CO · Member since 2008 · 25 posts · 0 votes
17y
Unless it's a local restriction (HOA or otherwise) where someone will actually notice it, does it really matter? What would FNMA do if you sold it 2 months later? ...
Besides the fact that unless you plan on double closing, 3 months isn't that long to buy, rehab, list, and resell a place. It may take your end buyer 1 month to close anyways, so that's really only 2 months until you have a contract signed on it. And if it's a rehab that you're managing yourself (assuming you're not a rehab pro that gets them done in 1 week) ... then it'll take 1 month to rehab, get it staged, etc. So that leaves you with 1 extra month that you're really "sitting around doing nothing".
Indianapolis, IN · Member since 2008 · 759 posts · 185 votes
17y
I have had some success with getting FM to waive the deed restriction in the past. but recently it seems they are not willing to budge.
You can always request that the restriction be waived, it does not hurt to ask! It really all comes down to how solid the servicing company is and if they will take the time to work on this for you. (It seems that most could care less)
If they stand their ground, we have been able to get a small price reduction for our troubles. (We complain a bit because the agent/bank did not disclose this restriction, and it pops up when you see the bank addendum!) In my opinion, it is a sneaky move that should not be allowed.
Most of the FM properties we have bid on, we did not know that they were FM owned in the first place!
It is very frustrating, but as jbrooks said above, unless you are busting these out as a professional business model, 3 months does go by rather quickly! Just price in a little extra holding time into your expenses to compensate for the issue.
** Can anybody explain how these restrictions help, or what FM intentions are. I have never really received a clear explanation.
I would assume they are to prevent some fraudulent activity that has been experienced in the past with refi cash outs, but the banks have seasoning issues to protect from that now anyway. It seems to me that it keeps property values in an even more depressed state, doing more harm than good to the communities.
Manhattan, NY · Member since 2008 · 801 posts · 61 votes
17y
Originally posted by jbrooks:
Unless it's a local restriction (HOA or otherwise) where someone will actually notice it, does it really matter? What would FNMA do if you sold it 2 months later? ...
With that restriction, you do not have marketable title until it expires. No reputable closing agent would touch it and no title insurance company would insure it. So, no loan would be underwritten.
If you accept the restriction, you will have to live with the restriction.
Denver, CO · Member since 2008 · 25 posts · 0 votes
17y
Originally posted by Taz:
Originally posted by jbrooks:
Unless it's a local restriction (HOA or otherwise) where someone will actually notice it, does it really matter? What would FNMA do if you sold it 2 months later? ...
With that restriction, you do not have marketable title until it expires. No reputable closing agent would touch it and no title insurance company would insure it. So, no loan would be underwritten.
If you accept the restriction, you will have to live with the restriction.
How do you not have marketable title? Is the selling limitation spelled out in the deed? Or does FNMA record something else? If it's only the contract, how would the title company ever know?
Manhattan, NY · Member since 2008 · 801 posts · 61 votes
17y
Originally posted by jbrooks:
How do you not have marketable title? Is the selling limitation spelled out in the deed? Or does FNMA record something else? If it's only the contract, how would the title company ever know?
Go back and read the first post in this thread...
It is a deed restriction. The title will not be marketable until the three months have passed.
Residential Real Estate Agent · Mt. Pleasant, SC · Member since 2010 · 257 posts · 130 votes
16y
I have just come across this too while looking at FM purchases. The blank contract says you can't convey for "GREATER THAN $______ FOR A PERIOD OF ___ MONTHS". Do they automatically use the purchase price, or could you change it to the ARV of the property?
Same question regarding the 2nd part, which puts a maximum mortgage restriction - could this stop you from getting appropriate rehab financing?
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
16y
If you have blanks in that agreement, I would fill something in, since you can say that you refuse to execute on an agreement that contains blanks. I'd write the word "zero" in the blank in front of the number of months. That should do it IMO.
Real Estate Lender · Wheat Ridge, CO · Member since 2009 · 113 posts · 59 votes
15y
This restriction also affects loans and many hard money lenders would normally be willing to lend more than Fannie allows. What stops a lender from making a loan for the full amount of the restriction and than advancing another $5,000 or $10,000 under the same note and deed of trust. No one would know until the payoff statement was produced. Has anyone ever even heard of Fannie enforcing this or is this more of a scare tactic. If they did want to enforce it what would they even do?
Real Estate Investor · Dearborn, MI · Member since 2009 · 56 posts · 40 votes
14y
These deed restrictions are so counter productive for all parties. Investors are working to increase the value of homes, and improve communities and standards of living. There are plenty of great investors, like my company, out there who understand the value of quality workmanship. These deed restrictions encourage the 'slap paint on a pig' investment style.
I have just started looking into the why behind this deed restriction, and I plan on finding the 'who' in this process who has authority to rethink the logic.
...Hoping to find someone before I reach out to Ben Bernanke and point out how non economical this restriction truly is. :lol:
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
14y
Originally posted by Gregory Rankel:
I have just started looking into the why behind this deed restriction...
The "why" you would get if you asked the banks is that they are trying to discourage unethical investors who are looking for a quick buck from buying, doing low-quality renovations and quickly reselling to unsuspecting owner occupants.
That may be true. It's also likely true that the banks don't like the fact that individuals have the opportunity to profit (sometimes greatly) off of their non-performing assets, and they are trying to limit the ability of private citizens gaining on their loss.
Obviously, I would never expect anyone in bank management to admit this.
...and I plan on finding the 'who' in this process who has authority to rethink the logic.
It's less logic and more ego/emotion. I'm quite certain those who make these decisions understand the impact; I'm also quite certain that they have no desire to change the process.