How do you flip wholesale deal when bank says "no resale before 90 days"?

Question

In a wholesale deal how does one get around the HAFA guideline that states "the buyer agrees not to resell the property before 90 days" (especially when you intend to use hard money)? Is this condition ever negotiable? :roll:

Jon Holdman · Answer

The bank cares because they DO NOT want you to make a profit.  Simple as that.

The bank is taking a loss on the sale of this property.  If you can turn around and sell it and put some money in your pocket, they don't like it.  That want that money in their pocket.  From their perspective, you're cheating them out of your profit because they should just be selling to your end buyer at the higher price.

David Wedemire · Answer

You seem to be misinterpreting criminal fraud with breach of contract. The DOJ would have to prove there was intent to defraud. If you did not have a buyer lined up before the closing then there would be no fraud. The contract with the bank is concluded once the closing is done. Likely if you did resell the bank would not deal with you again provided they have someone checking this which is unlikely. The "FBI" and DOJ are looking for flipping mills and not individuals. This is a strong arm tactic by the banks.

Mike Morrison · Answer

Kathy, quit trying to find a "work around". These folks are serious as a heart attack. If the bank even suspects a work around guess who gets a copy of the paper work? FBI & DOJ. They are after the low hanging fruit.
Read the foreclosure & SS addendum's very carefully. Some banks/lenders have a resale time limit others restrict "profit" from a flip. Take it from me, they won't negotiate away these restrictions. What they are doing is transfering criminal penalty risk exposure to YOU.

Dan Koch · Answer

I've had some success negotiating and having the lender drop the deed restriction. This was nearly 1yr ago, so I have no idea what is working currently as I have dropped almost all short sale activity.

Another investor that I know and have done some short sales with, tells me that he is still getting the deed restriction dropped on nearly all of his deals.

I know he screens his deals based on the lender, so I have no idea which lenders are budging and which are not.

I can almost guarantee that BofA is being avoided like the plague.

Kathy Braschler · Answer

Thanks all for your comments.  I'm just thoroughly confused.  I just don't want to get into trouble.  I don't understand why the bank cares when you sell it.  I'm thinking I could use a partner who is more familiar with short sales and wholesaling. The property goes on the MLS tomorrow.  When it's difficult enough to find a deal, then to have it slip away so easily is frustrating.

John C · Answer

How about just waiting 3 months to sell it? Its not that long.

Lee Kralovec · Answer

There Is one way. That is for the seller to put the house into a trust to start the process.

Curt Davis · Answer

Everyone seems to be trying to flip within 90 days.  Why not just close on the property, fix it up and get it rented out and then sell it turn key.  The investor who will purchase this will want it rented out anyways, why not just help the situation.  We do this all the time and it actually helps make the sale easier.  What is hard to get around is the resale price restriction. If you cant sell it for more then 120% of the purchase price you will need to hold for 90 days also.

Eric M. · Answer

If a bank makes some requirement a condition to close...and you close...you have agreed to abide by that requirement.

If you enter into that agreement with the intent that you will not keep that agreement (and you are caught), you will be in a heap of felonious trouble.

The material fact witheld in this case is your intent to break the contract.

Ali Shah · Answer

@ J Scott

I agree with you as a breach of contract is NOT a criminal matter. In an essence besides all the addendum and so called extra paper work, if you bought a house, now you decide to sale it, it is your and you can do what ever you want to do with it.

FBI and DOJ are looking for frauds. Withholding material fact is a crime not breaching a contratc.

How do you flip wholesale deal when bank says "no resale before 90 days"?

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