Replies to This Discussion

Permalink Reply by Bryant Tutas on October 25, 2011 at 10:47am

As long as the sellers lender allows it I can't see it being a problem. I'm not aware of anything that would stop the buyers lender form lending. Family members purchase properties from each other all the time. It's the short sale lenders that balk at it. This just goes to show you that all short sale transactions are different.

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Permalink Reply by Mike Mondy on October 25, 2011 at 10:58am

@Bryant Tutas: That's what I thought but a local lender of mine told me they couldn't do it because of all the "cracking down" on this sort of thing.

If anyone else has encountered a situation just like this, please chime in.  Thanks!

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Permalink Reply by Jeff Payne on October 26, 2011 at 3:08am

If I had a lender tell my buyer that they could not buy their brother, sister, mother house I would simply tell that lender that I will take my buyer business elsewhere.   It is non sense.   Do you mind telling us what lender told you that? 

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Permalink Reply by Mike Mondy on October 26, 2011 at 3:12am

For now ... 3 local lenders (not the big hitters like BofA, Wells, etc) have all said the same thing ... will check with some others as well ... I threw this up on ActiveRain as a specific referral as well this morning just to see if anything sticks ...

I think the key here is that this is a short sale with a significant deficiency ... I can't imagine a lender would care if the house wasn't underwater ...

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Permalink Reply by Rodney Mason on October 30, 2011 at 2:43pm

There are agency guidelines (i.e. FHA, Fannie Mae, etc) that restrict transactions where the parties are related.  The lender is only following industry guidelines on this matter.

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Permalink Reply by Smitty on October 25, 2011 at 12:09pm

I swear there was a post on this site about this very subject.  I can't remember for sure but I think it was a tenant that wanted to buy the landlords house but HER LENDER wouldn't allow it and said it wasn't "arms length" and to be honest, I had never heard of a buyer's lender ever making that stipulation. 

 

I think it could be done...maybe...as long as the selling lender didn't have an issue and maybe was open to issuing a letter to such OR the buyer was willing to go local for their loan.

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Permalink Reply by Niki Roberts on October 26, 2011 at 5:22am

I have a question for you guys, I have a buyer who wants to purchase a home that the lender is BofA, and they want to fix and flip it. BofA's Addendum has verbiage on line 10 of their Addendum, that scares my client a little bit. I called BofA, and they are telling me that they can't answer anything on the buyers side, and I would have to talk to the negotiator on the seller's side. Well, how in the heck can I talk to the negotiator, if there is no offer presented yet, and the file has not been assigned a negotiator??? So I am coming to you guys to see if you have run into this situation. My client is being cautious, which I do understand, but there are many investors that are purchasing, and flipping BofA's homes without any issues. Here is what line 10 says: "The Parties acknowledge and agree that this Short Sale transaction will not constitute appraisal fraud, flipping, identity theft and/or straw buying." The buyer is concerned about the flipping issue obviously, so has anyone else had this come up with an investor buyer. How can they put a stipulation on their Addendum without giving a deadline for it?

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Permalink Reply by Mike Mondy on October 26, 2011 at 5:34am

@Niki Roberts: I'm not sure what to say about this but I would suggest starting your own discussion with this question so you have a better chance at finding the answer you seek.  The chances aren't too great that your question will be "heard" if it only remains in this separate, non-related discussion ...

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Permalink Reply by Jeff Payne on October 26, 2011 at 5:38am

I guess I would want to know what the bank means by a flip.  If your buyer purchases and then makes improvements to the property and resells, I personally would call that an investment and not a flip.  Of course it does not matter what I think :(

Does the addenda have a timeframe?  30 days, 90days?

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Permalink Reply by Niki Roberts on October 26, 2011 at 6:08am

I agree, but we are talking about good ole' BofA :o) It does say that the property can't be transferred for 30 days, but then it contradicts what they said with the flipping. I personally think the buyer will be fine, but it doesn't matter how I feel, because the buyer's are concerned about it. Here is what it states:

8. Buyer agrees that property cannot be sold or otherwise transferred within 30 days of closing;

10. The Parties acknowledge and agree that this Short Sale transaction will not constitute appraisal fraud, flipping, identity theft and/or straw buying.

11. The Parties acknowledge and agree that any misrepresentation or deliberate omission of fact that would induce the Bank of America, Investor or a Mortgage Insurer to agree to the terms of a short payoff which would not have been approved had all facts been known, constitutes Short Sale Fraud and may subject the responsible Party to civil and/or criminal liability.

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Permalink Reply by Jeff Payne on October 26, 2011 at 6:25am

Looks simple to me, they can not sell for 30 days and if they are rehabbing and reselling it will most likely take longer than that anyway.

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Permalink Reply by Smitty on October 26, 2011 at 9:58am

Niki, if you client is rehabbing they are fine because I highly doubt they will be able to flip it and get it back on the market in 30 days.  I mean unless the seller let's them in early to do work it's really almost impossible, and I would NEVER suggest to a seller to let a buyer in early.

 

If your client wants to just do a straight flip AKA back to back closing, they won't be able to do it until the 31st day as they won't be able to get title insurance on that language.

You're perfectly FINE on number 10.  Per Ron Ballard, Esq., “Appraisal fraud” applies to bribing or coercing the bank’s appraiser of BPO agent. Don’t do that. (Providing legitimate, true data to the BPO agent is not fraudulent but is merely assisting the BPO research quality.) “Flipping” requires two transactions. “This Short Sale transaction” is only one transaction, so it cannot constitute flipping by definition. “Identity theft” means you stole someone’s identity who is not part of the transaction. If you did, go to jail. “Straw buying” means that the buyer is buying on behalf of an undisclosed principal or is a fictitious (non-existent) person. I'm asuming, the buyer is a real person or entity who is taking title with real cash, so this does not apply.

 

#11 The Parties agree that “any misrepresentation or deliberate omission of fact that would induce” the bank, investor or mortgage insurer to agree to the terms of a short payoff “which would not have been approved had all facts been known, constitutes Short Sale Fraud . . .” This provision seems to be upsetting people. First, there is not a crime defined as “Short Sale Fraud.” Hence, there is no basis to know what this means. Second, this requires that the “parties” know the bank’s, investor’s and insurer’s basis for decisions. We often see banks deny good deals. How DO they think? There is no obvious reason for their bad decisions, so how can anyone be expected to know their reasoning? This statement does not make law. Only judges and legislatures make law, not banks. If you are using appropriate disclosures in your contracts which state investor intent, and the buyer and seller have given them to the bank, note investor and insurer the relevant information they need to make a decision: that the buyer is in the deal to make money and not to live in the property. The possible resale price is not relevant because it is speculative until actually closed and the B-C can’t be closed until the A-B is closed. Moreover, the investor-buyer might hold the property and rent it out, which makes the profit indeterminable. So long as all facts and intentions stated in the short sale package are true and there was not an offer received prior to acceptance of this buyer’s contract which the investor-buyer expects to accept (and subsequently does), then there should be no risk of fraud. This provision is designed to intimidate, not to be legally accurate.

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