The Short Sale lenders are getting crazier and crazier.\u00a0 That is why you need to stay current with the short sale changes.\u00a0 Approximately 3 years ago, Bank of America was the first short sale lender to start requesting that the new buyer of the property consent to not resell the property for less than 30 days.\u00a0 This statement was included in their short sale approval letter.\u00a0 This statement alone caused a lot of challenges to investors who were still looking to close back to back on transactions.\u00a0 A few short sale lenders thereafter, such as GMAC and Wells Fargo, started adding 60 to 90 day resale clauses on their Arm\u2019s Length Affidavits, but not their short sale approval letters.<\/p>\n
Recently, I was in the process of purchasing a property where I needed to get an extension on the short sale approval letter.\u00a0 The reason was that the Homeowner Association advised us that, pursuant to their by-laws, their 35% ownership of investment properties had been reached and only homeowner occupants can purchase the property.\u00a0 The servicer for the lender was Seterus.\u00a0 I received a brand new approval letter for the same exact buyer as before, but with a few different statements:<\/p>\n
1.\u00a0 The purchaser cannot resell the property within 30 days of the short sale settlement date.\u00a0 The purchaser cannot resell the property for greater than 120 percent of the short sale price within 90 days of the short sale settlement date.<\/p>\n
2.\u00a0 The deed conveying the property to the purchaser should be amended, in compliance with applicable state law, to include the following provision:\u00a0 \u201cGrantee herein is prohibited from conveying captioned property for any sales price for a period of 30 days from the date of this deed.\u00a0 After this 30 day period, Grantee is further prohibited from conveying the property for a sales price greater than $88,800.00 until 90 days from the date of this deed.\u00a0 These restrictions shall run with the land are not personal to the Grantee.\u201d<\/p>\n
WOW!\u00a0 \u00a0Now the short sale lenders are really placing a deed restriction on the property, as it is being included with the recorded deed because previously the purchaser or seller would have to sign a document either a short sale approval letter and\/or arms length affidavit acknowledging this agreement.\u00a0 This allowed many investors to do two closings using two different title companies and literally ignoring the deed restriction thinking that no one would know about the deed restriction since nothing was filed in public records.\u00a0 Well, the game is over ladies and gents, if you played that game, which I never recommended.\u00a0 Some of the lenders are now requiring it on the deed which also controls your profit.\u00a0 This particular loan was an FHA loan.<\/p>\n
Am I saying that all lenders are going to follow suit with these new restrictions?\u00a0 I would assume a few will jump on board, such as Bank of America, Wells Fargo and GMAC.\u00a0 You will need to be sure on your short sale deals that you know how long you will have to hold the property and make sure you have enough profit there to hold it.\u00a0 Please take the time to read every lender document thoroughly and if there is wording that you would like removed, ask them to remove it.\u00a0 I can\u2019t guarantee you that they will, as they did not do so on my transaction, but you won\u2019t know if you don\u2019t ask.<\/p>\n
What this really means is that you will need to buy at the right price and hold for the right number of days in order to profit BIG in the short sale arena!\u00a0 However, there are ways around getting your buyer in at the time of closing, which I will share in my next article.\u00a0 Until then \u2026 read your paperwork!!<\/p>\n
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Kimberlee Frank<\/p>\n