Am I the only wholesaler whos run into "The buyer agrees not to sell the property within 90 days of closing of this sale” clause on a short sale?

[Michael G.]

Am I by myself on this issue wholesalers? Better yet has anyone investor's, attorneys, ex-loss itigation people ever seen a bank go after someone for violatiing this clause?

[Shari Peterson]

Michael, I have seen it in various forms. One is that the short sale lender requires that all parties involved sign affidavits stating that they are aware of no intent to transfer the property in less than 90 days. Others just state that no transfer can occur within X days in the short sale approval letter, without the affidavit.

With the first example, I would recommend that you follow the letter to the T and then close on day 91. I'm not an attorney but it seems to me that you would be flirting with trouble if you tried to do anything to the contrary. You can have the end buyer put up a substantial down payment that is non refundable and then enter into a lease with them for the 90 days so that they can immediately get into the property. Then, close on day 91.

You can do that also with the 2nd example, but some creative investors have found title companies that will work with them and close the first deal without putting anything on title saying that it cannot be transferred for 90 days. The title company's philosophy is that title companies insure the past, not the future, and they don't believe that the lenders have the authority to put on such a restriction. Then, you follow by closing the 2nd deal with a different title company. Both title companies need to be made aware of the circumstances so that you ensure that you are operating ethically.