Seller terms: No HML or HELOC?

Question

I was analyzing an auction home today and ran across the seller’s term that specified “No Hard Money Loans or Home Equity Lines of Credit will be permitted”.

Why would a seller care if the money came from a HML or HELOC?

Alan Carita · Answer

If the HELOC is already open it's just an open checkbook and as good as cash. I assume they just dont want someone having to go the the bank and start the HELOC process as that takes time and most likely introduce contingencies (property has to appraise to get HELOC). I'm working to get a HELOC open now so I can also make "cash" offers. Even if that means a cash draw from my HELOC and I show up with a suitcase to get a good deal.

John Daugherty · Answer

@John Teachout. I’ll try.  It’s an auction house so it’s probably bank owned, right?  I’ll see what I can find.

John Teachout · Answer

Why not ask the seller the reason for that stipulation? People on here would be curious to have an answer.

Odie Ayaga · Answer

If they weren't prohibiting conventional loans they may be trying to steer a purchase to a homeowner especially if they have a stated period where only loans from homeowners will be accepted. We've come across a few like that that didn't specify no hard money or HELOCs, but didn't allow non-owner occupied offers for a certain number of days.

John Daugherty · Answer

@Alan Carita. You’re probably right Alan.  Same here.

Odie Ayaga · Answer

@John Daugherty it may be area dependent, state dependent, or just seller dependent. If you just stipulated a time period then you could still end up with an investor buying, but by doing it that way maybe the notion is they can indefinitely freeze out most investors not buying all cash.

John Daugherty · Answer

@Odie Ayaga. That makes some sense, but wouldn’t it be easier to just stipulate that directly?

John Daugherty · Answer

@John Teachout. Exactly my question.  I thought it was odd.

John Daugherty · Answer

@Wayne Brooks I get that reasoning, but if someone pulled money from their HELOC and put it in their bank account, would they then qualify for the buyer?

John Teachout · Answer

I've never seen a stipulation like that. I'm not sure that is even a thing. If you're going to pay cash for a property (not contingent on financing) then why should they care where you got those funds? Makes no sense at all. The only way I see where maybe they're coming from is the buyer thinking that they'll acquire a HELOC or HML if they win the bid and maybe can't get it. But if the funding is already in place???

Seller terms: No HML or HELOC?

Most Popular Reply