I’m about to close on this property that I have under contract for $60,900. The comps are around $140K-$150K. It’s a foreclousure and the seller has a non-negotiable clause that says I can’t sell it within 90 days for more than 120% of the purchase price. Does anyone know why’d they do it? I figured it’s because I’m getting a helluva deal on this and they don’t want it back on the market 30days later for 100K more than they sold it for.
Everything is negotiable. I would ask him why he has that in there — and have him remove it from the contract before you do the deal.
The only reason I can think of is that some states have anti-preditory real estate laws in place to prevent property flipping. FHA has strong lending guidelines against property flipping, so he may have purchased the property as a HUD Foreclosure and he is concerned that if you sell it at a much higher price that it may fall back on him. I would simply ask him why the restriction is in place and proceed from there.
I wouldn’t worry about it, as it will more than likely take more than 90 days to get it sold. Just don’t list it on MLS for that 90 days. You can still let the world know that it exists and will be for sale via word of mouth, ads and signs.
What I would do to account for the financial costs of not being able to list it for sale for 90 days is lower the purchase price by your costs of keeping it off the market for at least 3 months. This means that if your mortgage payments will be $700 per month, your purchase price would be reduced by at least $2,100 (I’d make it $3,000 for the inconvenience imposed on you).
Yeah it is a HUD house and I talked to someone in my REI club and they said that happens time to time and they just drag their feet on the rehab more (more than normal). And it’s basically an ego thing that the seller doesn’t want to see what a hit they are taking if I put it back on the market a couple weeks later. It’s an all cash deal so I’ll just be worrying about utilities. The contract says I can list it on the MLS for whatever price whenever, but the sale date can not be 90 days from when I bought it.
well sounds like a great deal. take extra time to get everything done, by that i mean double check its done right and shop around for the best prices on the work.
your in a great position here, take advantage of it and enjoy the profits.
Don’t forget about taxes, insurance, and the opportunity cost of the money you put into the deal.