Buyers lender wants our HUD

[Brian Dalton]

My wife and I are under contract on a flip we purchased last summer. The buyer's lender, Wells, wants the HUD from when we purchased the property. Our lawyer has been pushing back as there doesn't appear to be any legal reason given for doing this. The only explanation we've received is as follows:

"The justification for needing this document is we need an acceptable document that confirms purchase price paid by the sellers for the subject. We need to verify this is truly a flip transaction and all those documents once reviewed by our quality review department will indicate if the property is truly a flip and how we proceed. If all of the documents are not provided, we will not be able to approve the property and the transaction cannot continue." 

We're not trying to derail our own transaction, but is the case of a lender run amok with random paperwork requirements based on nothing more than a checklist? Has anyone else ever had this requirement forced on them, and if so, what did you do? Why wouldn't they just use the tax records?

[Chris Mason]

Hi @Brian Dalton,

Your lawyer is right, there is no "legal reason given for doing this."

And there is also no "legal reason" why the lender must approve this loan. 

There are overlays, or there could be something causing the human underwriter to question the transaction, the value of the collateral, etc. Anti-flip overlays are actually very common, especially for jumbo loan amounts, but also retail banks.

The ambiguity associated with "once reviewed by our quality review department will indicate if the property is truly a flip and how we proceed" & the fact that it could simply trigger a "loan denied" for reasons unclear to you is always the price paid for accepting an offer from a buyer using a big bank.

You can try starting over with a new buyer or a new lender, if you like. The timing implications of this are exactly what they sound like -- starting over. And then whatever set this lender & underwriter off, could set that one off too.

Your purchase price is not a secret. Lenders and agents can pull property profiles in about 5 seconds. Is there a reason you don't want to share the settlement paperwork from your purchase?