So we had an issue with an arm's length affidavit. The buyer, un-related to the seller, is a corporation looking to buy and rent out the home. The bank countered their offer and the buyer's agreed to still buy at that price IF the bank would allow them to rent the house back to the sellers as tenants. I asked the negotiator and also sent this in writing to him and he SAID that was NO ISSUE at all.
We received an approval letter and moved forward toward closing. When the title company sent the final HUD-1 for approval we received additional closing docs which included the arm's length transaction affidavit. It stated in #5 that any lease back was NOT allowed. So of course no one was willing to sign this document. When I called the negotiator to have it changed he said he couldn't change it but the bank doesn't care what happens to the property. I asked for something in writing stating the same which he would not provide.
So I called HUD today and they say that investors are not allowed to purchase these pre-approved HUD short sales AT ALL. She further conveyed to me that by arm's length it ALSO means that the buyer(s) must be owner occupants.
Has anyone heard of this? In our area about 70-80% of the short sale closings are being purchased by investors; and almost always through a corporation. Why were we given the approval letter for this LLC if it were not allowed?
And now I'm worried that we won't be able to sell this home at all if we have to exclude the majority of our buyers.
Thoughts???
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Never heard of that, i just closed a HUD investor short sale a few weeks ago and have 2 more UC. Plus arms lenght has nothing to do with owner occupant, but an addendum that includes some verbiage to that effect might be required, but its different then arms length. Whoever you talked to at HUD might be talking about HUD homes vs. FHA short sales. I suggest you call the HUD national servicing center their reps are trained for short sale related questions and escalations.
National Servicing Center (NSC): (877) 622-8525
In my experience lease backs are not allowed. The negotiator might be saying thats not a problem because they want it closed but I have never come across with a bank that is ok with that. If the bank was ok with a lease back they would not ask them to sign something saying they agree not to do that. If the bank approved an LLC buyer its allowed, but it sounds like the lease back is not allowed.
Hope that helps.
Paola, your answer is exactly my thoughts as well. I thought I was 'shooting in the dark' to get the lease back approved but when I asked and was told yes I was pleasantly surprised. Meant we could close asap and didn't have to find the seller a new place to live right away. I called the main HUD line but am now going to try C & L Service who can apparently create a ticket to have someone look into this case.
Thanks for your reply!
Susan. I closed on 2 FHA PFSs that were purchased by investors. It was not issue at all. I've read the FHA lender guidelines many times and no where does it mention anything about not selling to an investor (unless I'm blind). The rent back to the seller is a no no. They have to vacate.
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