I feel like I've learned a lot since joining this site and am amazed by how much good knowledge is available for free. Now I have a question of my own ... I'm working with a local lender (Colombo Bank) who has said that they don't care who buys the short sale as long as they get their money. My seller's son wanted to buy the house at the outset of the listing but I told him it wouldn't be allowed (just because that's what my instinct told me). Turns out my seller spoke with the negotiator today and told me that they would allow the son to buy the house ... now my question ... has anyone heard of a situation where this would be allowed by the buyer's lender? It seems like a lost cause to me but I thought I would at least ask ... any help is most appreciated!
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It will really depend on the type of financing the borrower is obtaining. For an FHA mortgage, HUD refers to non-arms length as "Identity of Interest". In a primary residence purchase, the maximum LTV is 85%. There are only a few instances where exceptions to this are allowed to go to maximum financing of 96.5%.
Any transaction where the buyer and seller are related will cause an extra level of quality control review as well. There is a lot of potential for fraud in this area.
good am,,
did not catched your name,, but my suggestion to you is that you make sure and call CHASE again and ask them yourself and le tthem know that your seller just informed you that it was okay for the son to buy the home. You will be surprise of how they really work.. it they say yes,, Please let me know. We all have family members that want to buy the Short Sales from each other, right? I will call CHASE myself on Monday.. Make sure and cover your self, it's not worth loosing your lic or getting your seller(s) or buyers into a law sue, right? An Arms Length Transaction should be what it is. Always confirm and get a second opinion. good luck to you.
I'm not sure what you're talking about Melba but thanks for participating in the conversation. Please feel free to call Chase ... I will not because I am not dealing with them. Thanks for the advice but my license is safe.
The interpretative definition of Arms Length is mortgage servicer, lender, PMI-MIP and investor dependent.
You can ask this question to several parties on separate transactions and get a different but correct answer from any one of them.
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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?
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?
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.
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.
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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