Would This Deed Restriction Stop You From Buying?

Question

First the numbers...

ARV = $150K

Repairs = $37K

House is in a nice deed restricted community in SW Florida priced at $77K.

Here's the deed restriction

If house is purchased by an investor who intends to the fix and sell the property, the investor cannot sell the property for more than 120% of the purchase price for 90 days.

Once 90 days is up, the investor can sell it for whatever the investor wants.

Since getting the $150K includes adding a bedroom and a bathroom, and will most likely take 90 days anyway, I think its worth doing.

What about you?

Wayne Brooks · Answer

This is a typical FNMA deed restriction for an REO or shortsale...has been for years.

Gilbert Dominguez · Answer

I would agree and my gut feeling is that by the time you do the addition, repairs, permitting and inspections the 90 days will go by anyway. Just pay attention to lenders as they sometimes require seasoning, meaning a certain time frame before they  go ahead and lend in the case you would want to sell. This is where education and experience comes into such deals. Ask around, ask real estate agents, real estate attorneys about local laws and policies as well and the Authorities having jurisdiction in your area. Net work with other real estate investors in your area and ask as much as you can so that you are well informed.

Other than that good luck with your deal. Hope you got real and current cost estimates from licensed contractors and made sure the stated , thought of or planned materials are definitely available at quoted prices so you do not get caught off guard. I would also verify the comps and or appraisals if any involved in determining the ARV.

Welcome again and the best to you.

Gilbert Dominguez · Answer

The only thing I can say about lenders is do allot of calling and inquiring starting with local lenders. Hopefully you have liquid assets and good credit, the more you do the more people will tend to work with you, listen you and help you. There may be times when other types of lenders such as private lenders or even hard money lenders will work with you without seasoning requirements and as long as there is a realistic possibility to refi then you can see how you can take advantage of what is currently available to you.

Sorry I cannot provide any actual names or contacts. I am out in California and you are out in Maryland. Might as well be on different planets since our respective real estate markets are vastly different.

(Second thought)

Here is one you can try. I think they are out in your area but I cannot guarantee they will be a fit for what you are looking for.

wholesale@synergyonelending.com

Tammy Vitale · Answer

@Gilbert Dominguez

- have you found lenders who don't require a one year seasoning?  My regular lender does.  But I never looked further than that.  You sound like you know a bit more about this than me.  Any input appreciated.

Jeff Morelock · Answer

Thanks Colin. That's what ours said but it states 120%.

Kate, we have not closed on this one yet so I can't give out the address. We're always open to selling them and moving on without rehabbing. Please send me a message if you're interested.

Kate H. · Answer

Where in Bradenton is this?

Colin G Murphy · Answer

Hi @Jeff Morelock

As @Wayne Brooks said, we have come across this a couple of times with Fannie REOs. It is no big deal - you just can´t resell to a new buyer above a certain price point before the 90 days are up. That doesn´t mean you have to wait 90 days to list it though.

The exact clause in our last contract was as follows

"Grantee herein shall be prohibited from conveying captioned property for a sales price greater than $xxx for a period of 3 months from the date of the recording of this deed"

You may also notice a clause specifying an upper limit to the mortgage/lien you can put on the property during this 3 month period.

Anyway, sounds like you have a nice deal! Make sure you circle back and let us know how you got on when it´s all done and dusted.

Jeff Morelock · Answer

Thanks for the info Wayne - exactly why I like BP. I guess I should have done a BP search because I found a few more threads on it after reading you post.

Looks like I have a sweet deal locked up. Now if I could figure out how to move Bradenton closer to Tampa I'd be all set lol.

Jeff Morelock · Answer

I've been in the biz since 1993 and have never seen such a restriction. Its on the deed but I doubt it matters due to rehab time. We did get a bid from a licensed GC we've vetted and used in the past. We have it under contract, but I wanted to get some input from BP. - Thanks for your input so far.

Would This Deed Restriction Stop You From Buying?

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