JUST GOT A CALL ABOUT REALTORS

[Bill Gulley]

Hi, I don't post new topics often, but this was something I thought I'd bring up. Just got a call about putting a property under contract.

Basically, an investor was buying a HUD property for the first time (not his first property). The question came up, is it "owner occupied"? He asked his Realtor while making out the offer and told him it was a rental. The Realtor said something like "it doesn't really matter, just say you're going to live in it". The Realtor went on to explain that they can't tell what your "intention is" there is no way to "prove anything" and just say you're going to occupy it.

He signed the offer with the advice of his Realtor and put his money down.

Then called me to get my opinion.

Most here know what that would be.

Closed sale are audited, by the state real estate commission as well as various regulatory agencies that had an interest in the subject property. Such audits may be up to two, somethimes three years after closing. Every real estate office in the country is required to keep closed transactions (some that did not close) for a period of time set by state regulation. Loan files are generally kept for at least seven years.

I had to explain to him that his Realtor was obviously more concerned with his making a sale than looking out for his best interests. This will generally be the case. Realtors are in business to make sales and make money, not advise people in legal matters, but in this case, the Realtor was either grossly misinformed or just plain lied to make a sale.

You can read all the regs, laws and contracts you like, you won't find any period of time that constitutes a holding period for an owner occupied home. The Realtor in this instance was saying basically that you can change your mind next month and rent the house......WRONG!

Your intent will be a subjective matter, and anything less than one year can be deemed to have been your intent. At three or less months, you will surely be deemed to have had renting in mind.

Penalties and circumstances will differ, I'm not writing a book here, so I'll keep it with HUD. The things that could happen is that you could be found guilty of fraud, your deal can be nullified, you can be fined, going to jail is not something I have seen for this issue, but a judge certianly could lock you up. But maybe the worse thing for an investor is being BARRED by HUD, which is an adminstrative action by HUD.

Being barred means you will never buy another HUD property, won't be able to obatian HUD financing, could throw you oiut of getting secondary market loans and even any bank loan, you won't be receiving Section 8 rental payments for any rental property and you may have difficulty in getting a real estate license in any strate or keeping one. After a period of time, you can petititon HUD to be removed from thier S_ _ _ list, but that's up to them, no appeal has ever been successful that I know of that will force HUD to deal with you in the future.

My advice to my caller was to announce his intentions. Continue the deal as an investor and if he can't, go on to another property. If his earnest money is at risk or lost, he needs to take that up with his Realtor.

When dealing with Realtors, understand what thier motivation is in working with you. They are not all honest nor are most of them any kind of expert in real estate, even though they have a license. They certainly should not be giving legal advice and telling a client how to circumvent rules, regulations and laws.

So, what is your opinion......experiences?????