FNMA Deed Restrictions and Loans

[Chris Clothier]

I would love to get some insight from anyone on the site who has dealt with this situation.

I think many of us are aware of 90-day deed restrictions. Has anyone had any trouble borrowing funds to purchase an FNMA property with a deed restriction inside of the 90 days? Here is an example and I would like to know how others with experience in these restrictions view this...

Property can be purchased for $100,000.
Property needs $30,000 in repairs.
Property has an ARV of $180,000.

We all understand that the property cannot be sold inside of 90 days for more than 120% of purchase price.

Can the buyer borrow all of the purchase price plus repair costs from a short-term lender...$130,000 or 130% of purchase price? Assuming that the lender will record a standard instrument protecting them as a lender, can the buyer borrow more than 120% of the purchase price even though they have no intention of selling the property before the 90 day deed restriction is up?

One last additional question. If it takes the recorders office 30 days to record the new deed, does the buyer have to wait 90 days from purchase or 90 days from recording to sell the property?

Looking forward to some feedback -

Chris

[John Chapman]

Chris, I couldn't tell if you're referring to a restriction that prevents transfer of title for 90 days or if it's one that prevents transfer and encumbrance of title for 90 days. If it's the former, then I have had no issue getting a loan for more than 120% of the purchase price. (I think Bank of America usually sticks these type in.) If it's the latter, then I have found no way around it. I looked at this about 7-8 months ago, but the problem (at least in Texas) comes from a title policy issue. (I wish I could remember more.)

My experience with the deed restriction is that it usually runs from the date of purchase, not the date of recording but, again, I think it depends on how the restriction reads.

Hope this helps (realize it's thin on details.)