Bank Owned Owner Occupant Requirement?

Question

I have a question for all the BP experts.

I am fully aware (and abide by) all owner occupant requirements when dealing with any type of government owned/marketed homes (HUD, Homepath, etc).

However - I ran across a new listing today that is simply bank owned (national lender) in which they are forcing a 14-day owner occupant only period.  Again, it is not a government owned/listed property - just a regular ole' bank.

Is this typical?  Do investors actually adhere to these rules, if paying cash? I spoke with the listing agent today, who confirmed there is nothing placed on the title to prevent the buyer from re-selling the home.  I understand (and agree with) not engaging in mortgage fraud and not fibbing when buying a government owned home...but just a regular ole' bank?  I (myself) have never seen a bank force an owner occupant period.

Disclaimer:  I am not suggesting anyone should ever misrepresent or be deceptive...

Mark Ferguson · Answer

HUD has a number you can call to report those people. They have prosecuted repeat offenders before. I am a HUD listing broker and have seen them cancel contracts, take earnest money and take away NAID numbers away from agents as well.

Account Closed · Answer

@Mark Ferguson   I have reported people.  Two of the properties were in the middle of assemblages I was trying to complete.

Account Closed · Answer

Many people do not even occupy HUD homes that were sold as owner occupant.  I have seen for rent signs in yards before the properties were even close on.

If I did that, I would be fined the $200,000 plus, they would keep my money, plus they would take the house, plus put me in jail... but basically none of that ever really happens to people.

Mark Ferguson · Answer

The research is not done by the banks, but by other investors. There are a lot of watchdogs out there making sure they aren't losing deals to cheaters.

Mark Ferguson · Answer

They are usually signing an affidavit that states they are occupying it. If they did not occupy it they would be in violation of the contract and committing fraud by signing that document.

I believe they do it to make the government happy. I am not exactly sure why, but maybe it has something to do with the foreclosure laws, bank bailout etc.  Banks have to go through a lot now to complete a foreclosure: offer short sales, loan mods, etc. SO even though the bank is not the government. There may be government restrictions in place that caus ethe banks to do this.

Julia Dugger · Answer

Owner occupants do typically bid higher -- often by several percentage points.

Julia Dugger · Answer

As background, these are generally implemented for PR and government relations purposes. Like it or not, lenders and selling banks are overseen by government regulators who often prioritize owner occupants in policy decisions and talking points. It's in the banks' best interests to say that they give owner occupants a first shot at properties -- good for communities, neighborhood stabilization, etc. -- so I think they're probably here to stay. I know that many asset managers will do a quick property check on buyers before accepting an offer to see if they own anything else and confirm that the buyer is not an investor.