Anti-Flipping Rules Haven't Gone Away
Have you seen GMAC’s Short Sale Anti-Flipping Contract Addendum? I had an investor client call me earlier this week. He was purchasing a short sale from GMAC.He wanted me to look at one addendum to the contract and give him MY opinion. Let me say here, I’m not an attorney and as I told him (and you) I could not give legal advice. He asked if I would look at the document with my investor hat on & see if I would sign it. Ok, I’m game.
Here are some of the highlights:
---Property flipping becomes illegal and a fraud for profit scheme when a house is purchased and resold within a short time frame at an artificially inflated value.
That’s about as vague as you can get. So is $10 more than you paid for the property inflated? Rule of thumb more than 20% is inflated. I talked to several mortgage folks and that’s their rule of thumb. Short time is usually under 90 days--- 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.
So now profit is a bad thing?
--- 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.
So, it’s left up to someone who is not familiar with a short sale to determine if a crime has been committed?
Now, I expect to see this addendum used in all REO & Short Sales. I know it increases acquition costs but, we must now involve an attorney in distressed sales.
And no, I would not sign this addendum. It’s a deal killer for sure. That’s why you need the services of an attorney. Again, this is my opinion. I am not an attorney and this is not legal advice.
Comments (4)
Chef Ira- You've got your eye on the ball. You are correct. Joe Six Pack can't see what you see.
Mike Morrison, about 14 years ago
There have been no real changes...only the facade of changes. Chef Ira @ http://www.partychef.ca
Ira Rotenberg, about 14 years ago
Uryss, I think this is an attempt to take the regulators eye off the ball so to speak.In Texas, it's still legal to "flip". It's just more difficult to obtail finanncing & a title policy without "seasoning".
Mike Morrison, about 14 years ago
Hey,Mike!I'm glad u posted this info.Being new to R.E.I this is something I'm definitely going to make sure I'll pay attention to when looking @ REO & Shortsales. does this look like a sign from these large finance institutions that they are trying to make flipping ILLegal? Thanx, Uryss mitchell---- San Antonio,TX
Uryss Mitchell, about 14 years ago