Very odd real estate situation--thoughts, please...

[Lisa loves Pooh]

In our house hunting search, we found a house that was perfect. It cost a bit high, so we offered on something else but had our realtor follow up on perfect house.

Long story short, we opted to offer on perfect house instead--but then it got....strange.

Has anyone EVER heard of this:


Home purchased by flippers (and with FHA loan but since they wanted to flip it--only buyers who could come up with 20% down could buy since they were selling it within the first 6 months of ownership.

(**my first question was "is this a legal thing?")

We offered--and the real estate agent was *personally* insulted. I get not being happy, but as far as we know--the agent is not the owner. Seems odd to me. Especially since it will be tough to find any buyer that has 20% to put down.

They have countered and while the price was okay before I knew about their antics--it just all seems odd and full of shenanigans.

They said that "next month" they can sell it to anybody (so this would be month 5 of their 6 month "freeze").

No record of sale can be found in auto search by our realtor so she will call the county tomorrow. (ETA: This is Prince William County, Virginia).

Our realtor--in business for a long time--has never heard of such an arrangmenet. She will also call our bank tomorrow to see what they say from a loan perspective about such restrictions.

It's their house and they can do what they wish--but it just seems corrupt. I told my husband that I have this funny feeling that they will log the sale as "less" and try and scoop 10% "under the table" which from what I understand is totally illegal. But I can't come up with any other logical explanation.

Anyone hear of anything like this?

FWIW--due to the shenanigans, the house is no longer perfect. It just feels like a dirty deal even though it doesn't have to be since the home list price actually corresponds well with comps.

 

[golfgal]

That does sound weird--first, as far as I know and I could be wrong but to get an FHA loan you have to have that house as your primary residence so if that is still the case, there may be a 6 month minimum ownership to prevent people from flipping houses and they are requiring the 20% down so someone else doesn't come in with an FHA loan and they get found out.

 

[Lisa loves Pooh]

That does sound weird--first, as far as I know and I could be wrong but to get an FHA loan you have to have that house as your primary residence so if that is still the case, there may be a 6 month minimum ownership to prevent people from flipping houses and they are requiring the 20% down so someone else doesn't come in with an FHA loan and they get found out.

I guess I'm not following how they would not be found out since their loan would be paid off in transfer of ownership.

Another odd thing--their MLS/Realtor listing mentions nothing about their "requirement".

If they are trying to hide something--it will be the second realtor that our realtor will have to report.

 

[golfgal]

I guess I'm not following how they would not be found out since their loan would be paid off in transfer of ownership.

Another odd thing--their MLS/Realtor listing mentions nothing about their "requirement".

If they are trying to hide something--it will be the second realtor that our realtor will have to report.

That realtor might be in on the scam. I don't know how the mortgage pay offs are tracked but it is possible that FHA won't catch it. Speaking from experience, I know of a builder that was buying houses under various relatives names/credit, kept the mortgage person happy and it all seemed above board until someone else found out that none of the people who "bought" the houses were living there...then the proverbial stuff hit the fan. I would suggest that your realtor investigate as much as possible previous sales by the other realtor.

 

[The Mystery Machine]

Is this earnest money in the form of 20%?

 

[Lisa loves Pooh]

Is this earnest money in the form of 20%?

No--this is the down payment that you would bring to the table when you close on the property. Not including the closing costs.

They will not sell to anyone (so they say) who cannot bring 20% to the table. The home value on its own and their list price doesn't require that. It will easily appraise and allow for a conventional mortgage.

 

[The Mystery Machine]

Looking up FHA flipping rules.....From what my dh and I can access the seller did an illegal loan on the property. We are guessing they took out an FHA loan on the property on and did not live in the home. Whether that is true or not who knows?

He cannot dictate your finances. We think him requiring the 20% is weeding out buyers that are going to bail. It is a strongarm tactic.

http://usgovinfo.about.com/cs/consumer/a/antiflipping.htm

 

[Lisa loves Pooh]

Looking up FHA flipping rules.....From what my dh and I can access the seller did an illegal loan on the property. We are guessing they took out an FHA loan on the property on and did not live in the home.

http://usgovinfo.about.com/cs/consumer/a/antiflipping.htm

Methinks they are about to get in big big trouble then.

 

[The Mystery Machine]

Methinks they are about to get in big big trouble then.

That is just speculation. He may just be a big jerk. But he is full of crap.

 

[Lisa loves Pooh]

Mystery Machine:

I wonder if this is what they tried to do:

•Re-sales occurring between 91 and 180 days will be eligible provided that the lender obtains an additional appraisal from an independent appraiser based on a re-sale percentage threshold established by FHA; this threshold would be relatively high so as to not adversely affect legitimate rehabilitation efforts but still deter unscrupulous sellers, lenders, and appraisers from attempting to flip properties and defraud homebuyers. Lenders may also prove that the increased value is the result of rehabilitation of the property

.

I do not know the prior condition of the home--but it was all fresh carpet, paint and a claiming of other upgrades.

I'm guessing that it would not have been too much of an issue if it were originally a conventional home. But the house definitely hasn't been lived in for at least a couple of months to allow for all of the work and its present meticulous and vacant condition.

 

[The Mystery Machine]

Mystery Machine:

I wonder if this is what they tried to do:

.

I do not know the prior condition of the home--but it was all fresh carpet, paint and a claiming of other upgrades.

I'm guessing that it would not have been too much of an issue if it were originally a conventional home. But the house definitely hasn't been lived in for at least a couple of months to allow for all of the work and its present meticulous and vacant condition.

I don't know, I am not an agent yet. All I know is be wary of someone who is being a weirdo. He is either a huge jerk or is doing something shady. It is really hard to tell.

He does have to get to the 180days however we are questioning the appraisal. Something is not right here.

It could be that the house is not going to appraise out. That may be the likely thing here. However hard to tell.

In essence, by you putting down 20% you are going to cover the delta. Obviously you would get an independent appraisal.

I would write the contract up that it has to appraise out thru an independent appraisal company in order for the deal to go forward.

 

[Lisa loves Pooh]

That is just speculation. He may just be a big jerk. But he is full of crap.

True--but a licensed realtor should know better and if it is simply an ethics issue and not necessarily a legal issue, I'm sure my realtor will report them anyway.

The lack of any documentation of sale is bothersome. Every other property--we have even those that are known flips--we can find out acquisition information.

 

[Lisa loves Pooh]

It could be that the house is not going to appraise out. That may be the likely thing here. However hard to tell.

That's the other odd thing--it shouldn't have any trouble appraising out.

If I didn't know any better--the house feels like it fell off the back of a truck.

 

[The Mystery Machine]

That's the other odd thing--it shouldn't have any trouble appraising out.

If I didn't know any better--the house feels like it fell off the back of a truck.

Says who? The banks are being nitpicky to the nth degree. You may find that what you think it will go for is not the case at this moment.

 

[Lisa loves Pooh]

Says who? The banks are being nitpicky to the nth degree. You may find that what you think it will go for is not the case at this moment.

Hard to say how we came to that conclusion--but between us and our realtor pulling preliminary comps--it lines up with the asking price.

We avoid the homes that their asking price doesn't come close to matching the comps (have had some that are $40-$50K over and there is no way a loan would get approved unless of cousre you came up with the delta in value).

It would be impossible for this home to be at such a deficit.

 

[elgerber]

I am a loan processor, and 90% of my files are FHA. There is a 6 month flipping rule with FHA, but that doesn't mean you can't get an FHA loan. I have one on my desk right now. You cannot sell a house until you have owned for 3 months, on an FHA. If it is less than 6 months, you can sell it FHA, but if you are selling it for more than 50% more than you paid for it, 2 appraisals are required. We do it all the time.
So, either they don't think they can get the value, or they don't want to pay for the 2nd appraisal. FHA does not allow the borrower to pay the fee for the 2nd appraisal.

 

[Lisa loves Pooh]

I am a loan processor, and 90% of my files are FHA. There is a 6 month flipping rule with FHA, but that doesn't mean you can't get an FHA loan. I have one on my desk right now. You cannot sell a house until you have owned for 3 months, on an FHA. If it is less than 6 months, you can sell it FHA, but if you are selling it for more than 50% more than you paid for it, 2 appraisals are required. We do it all the time.
So, either they don't think they can get the value, or they don't want to pay for the 2nd appraisal. FHA does not allow the borrower to pay the fee for the 2nd appraisal.

Very interesting!

Thanks for the info.

Hubby says our contract letter lists seller as an LLC. Definite flip.

He's presuming they got an FHA and he is now hypothesizing that they listed early to garner interest and then when they hit 90 days, the bid wars will begin.

I just don't get what a 20% down payment means to them.

 

[elgerber]

Very interesting!

Thanks for the info.

Hubby says our contract letter lists seller as an LLC. Definite flip.

He's presuming they got an FHA and he is now hypothesizing that they listed early to garner interest and then when they hit 90 days, the bid wars will begin.

I just don't get what a 20% down payment means to them.

The one I am working on right now is also owned by an LLC. Very common. The 20% to them just means they can skirt FHA's 2 appraisal rule for flips, because then it can go conventional at 20%. Frankly conventional loans are almost harder to get right now, and the appraisals at our company are picked apart even more that way, so I'm not sure that will get them what they want.

 

[Lisa loves Pooh]

The one I am working on right now is also owned by an LLC. Very common. The 20% to them just means they can skirt FHA's 2 appraisal rule for flips, because then it can go conventional at 20%. Frankly conventional loans are almost harder to get right now, and the appraisals at our company are picked apart even more that way, so I'm not sure that will get them what they want.

Thanks again, Erika....

DH wanted me to mention that we are approved for a conventional (already) at 10%.

Can you explain why a 10% wouldn't allow them to skirt FHA?

 

[elgerber]

Thanks again, Erika....

DH wanted me to mention that we are approved for a conventional (already) at 10%.

Can you explain why a 10% wouldn't allow them to skirt FHA?

You can still do conventional at 90% so I am not sure exactly. At 90% you would need MI and MI underwriting is much more strict than non -MI files. So perhaps they are still afraid the appraisal would not pass when being underwritten by an MI underwriter?
Do you have any idea what they paid for it, versus what they are selling it for?