I came across a new obstacle today. We found a single family that had been on the market for 80+ days. Asking $54,900, comps were $74,900-$79,900. We inspected, made our budget and then made an offer of $41,000. Seeing as it was a bank owned property we thought it would be a while before we got an answer. Well, my realtor called me back this afternoon saying that they were VERY interested in unloading the property but since it was a Fannie Mae house I coulnd’t resell it for more than120% of the purchase price within the next 90 days. Well, 120% of $41,000 is WAY less than what we would be asking for the house when it is done. Plus the rehab on this would take 3 weeks (carpet, paint and building one wall). So if we were to do this project we would have to sit on it for 90 days from closing before we could sell it. That’s not how we do it. I guess my question is are there any suggestions from anybody that has dealt with this or any loopholes? I am not open to lease options or land contracts at this point, and am definitely not open to holding a house that long. Is it time to move on or what? Thanks guys and gals. :beer
what’s the problem. it will take a month for the rehab and and you’ll be lucky to have it under contract within 30 days and then it takes 30 days to close. At worst, have the Buyer close on day 91 after you close your purchase transaction.
Right. That’s what the realtor said. What we are doing is listing it significantly under comp prices so that it moves QUICKLY. We need the money quick. That is the problem.
Yeah fannie mae is a Pain…that’s why they have such a MONSTEROUS list of foreclosures in my area. They don’t want ANY investors, they want people to buy and live in them. But houses are so messed up that just about NOBODY But and investor would buy it. PLus they ask TOO much for the trashed properties.
by the way, WHO pays the MONEY it costs for Fannie Mae to hold on to all these properties? I hope it isn’t tax payer money, that’s all I can say
Fannie is a private company.
don’t make the mistake of mixing them up with FHA or VA.
Fannie has nothing to do with the gov’t.
The problem may be that you need the money too quick. Just budget in an extra month or two worth of mortgage payment and increase your asking price by that amount.
Heck 41k you could practically float that on a couple of credit cards.
Also I have no idea what the current situation is, but in the past there have been many cases where investors ignored those conditions and did it anyway. Not sure if many/any of them got into trouble over it. It may be similar to one of those things where investors buy properties as owner occupied and it’s very difficult for the bank to figure it out. That’s why it’s hard to predict if the current housing market is in a bubble or not because there’s no real way to tell if all those owner occupied are really owner occupied or investor properties. Not that I’m advocating anything here, just an FYI…
Thanks everybody for your responses! My wife and I talked about it more and decided that we are going to go for it. It just doesn’t make sense to pass up on what we think is a slam dunk deal (as far as numbers go). This house basically needs cosmetic work except for turning one huge bedroom into two bedrooms. I think what happened here was a classic example of me jumping the gun and letting emotions get in the way too. Thanks for everybody’s input. I’m glad I didn’t flush this one down the toilet… :flush
You can always lower your offer a tad to adjust for the extra holding time…
That’s not quite entirely true…while Fannie Mae is a private company and receives no government funding, it operates under a Congressional charter and does have some govenmental oversight…
Keith
First off, Fannie can’t and won’t prevent you from selling the property for 120% or more in 90 days. That’s not an accurate rule. I work for a wholesale lender and there is ZERO seasoning required by Fannie Mae for conforming loans. What IS required is that if a property has increased over 20% in value in 90 days that the underwriter justify that. Purchasing of foreclosed or distressed seller properties is absolutely justified under conforming u/w guidelines.
Furthermore, even if Fannie Mae wouldn’t allow it, you could still sell the property for Cash, Lease to Own, Owner Finance, or sell the house to a borrower with Sub-prime, Alt-A or FHA (although HUD is more difficult than even Fannie so it’s unlikely that HUD would allow it) financing. Hell, you could even sell the house using Freddie Mac financing instead of Fannie Mae.
Do not worry about this BOGUS claim that you can’t sell the house for more than 20% within 90 days.
P.S. On a side note, if a 41,000 purchase puts you in a bind if you can’t sell it in 90 days…you may want to rethink your financing strategies, because 90 days will go by VERY fast so you should be able to comfortable hold any property you purchse for 6+ months. Otherwise you will not be financially secure as a real estate investor.
Please don’t speak with such ‘authority’ if you don’t know the subject you are speaking of. I am a full time mortgage broker and have seen a number of times recently this exact situation.
Fannie actually files an addendum to the deed that spells out those exact provisions. “This property can not transfer for more than $xx.xx until a specific date.” This is signed by the buyer (investor) at closing and recorded with the deed to the property. Therefore, no title company will allow the property to transfer if this restriction is not abided by.
Thus, you CANNOT sell the property for cash or using Freddie financing as you suggest.
I understand you want to think you know it all, but in this case you are sadly mistaken and that attitude could cost someone money if they listen to your ‘professional’ opinion.
Broker Dave is on the money. I’m purchasing my 2nd Fannie Mae property with the 120% rule. You have to sign the docs that indicate you cannot sell the property for over 120% of the purchase price for the first 90 days and you can’t borrow more than 120% of the loan as well.
I’ll be signing these docs in 13 more days and to boot I already have it sold in as is condition to a rent to own tenant. This rule is a non factor because we have exit strategies that you are not willing to use since you “need the money now” This is a bad omen my friend. If you need the money so bad how come you are not wholesaling properties instead of doing rehabs which are labor, time, and money sensitive? Our first fannie mae we sold to an investor as a wholesale deal which was under our “restriction”. I’m getting very solid deals on Fannie Mae’s and dealing with the restrictions appropriately. As investors you need to be flexible with your exit strategies i.e. rent, rent to own, owner financing, carrying back a small second to help a buyer get in the door, etc. You are saying to rehab and that is your only way. Don’t get burned by this thinking.
Nate-WI
Just to clarify, Fannie Mae is a publicly traded company, ticker = FNM.
That is what I was thinking. The worst time to go into any business (and real estate is a business) is when you need the money from that business.