On the latest FNMA addendum, there are deed restrictions that need to be filled out. I believe it is section 16. These are for resale/refinance amounts and are a time restriction. What are FNMA's normal requirements for this (for an investor)? Thanks in advance.

I belive 3 months...

Yes, three months, but that applies to investors only. No deed restriction is applied to homeowners who will occupy the residence.

Ok. What is the price limit? If the purchaser is buying the home for $100K, then they can't sell or refinance for $_____ for 3 months? thank you.

more than 120 percent of purchase price

The deed restriction is for 3 months from the date of the Deed and you are prohibited from encumbering the subject property with a security interest in the principal amount of no greater than the purchase price.

Thanks, liz. Been selling FNMA properties for a year through outsourcers and this is my first sale to an investor on a FNMA property. Most of our sales are recent construction going to first time homebuyers. I asked my AM what the guidelines were and he wouldn't tell me. He tells me to talk to my broker. Well, I'm the broker and just hadn't run into the situation before. I couldn't believe my AM just wouldn't tell me. Weird behavior.

You're welcome. Fannie Mae's intention, I assume, is to cut down on artificially inflating home values during flipping schemes. They did have a 12-month restriction and I think it was then a 130% cap. The current 3-month, 120% restriction does allow an investor to sell quickly, if needed, but not to make much profit in the turn-around.

If an investor is honestly fixing up a property for resale, they really only need to wait out 60 days (presumably, they are using that time to fix and market the property) and then 30 days in escrow.

Maybe the AM didn't know the terms of the deed restriction, or maybe he/she didn't know enough to explain/defend it?

I don't know. I wasn't arguing with the AM--I was just asking him what the parameters were. It's all good, though. Hopefully, I'll get the pages initialed by the buyer and get this one towards closing.

This is an old thread from 2008. Can someone update it with current restrictions when working with:

-investors

-owner occupants

There's a first look exclusion 3 days non-profits only, next 12 owner occs and non profits.
the investor deed restriction is that it can't be resold or encumbered for more then 120% of sales price for 90 days.

Unless the property is in pristine condition, 120% resale price won't cover the costs of a good rehab, appliances, interest, utilities, insurance on a vacant property, commissions and costs of sale, etc. That is unless FNMA thinks that flippers do this for free or worse. I don't think that the people who make these regulations have ever rehabbed and flipped a property themselves. They certainly don't understand the concept of profit. At least FHA has a provision (temporarily) for two appraisals and a home inspection to verify that the sales price is legitimate.

Actually, I think they understand it very well. They want to encourage more owner-occupant offers so that is why that provision is in there. It's also a deterrent to many "investors" who were committing fraud.

I believe this was implemented to stop the same day flips and multiple flips at progressively higher prices. There have been inbstances where a series of reconveyances among cohorts has resulted in 500K in loand on a property that sold for 100K all in the same month. Mega fraud. While it does address that, it still allows a 19.9% profit on a same day flip. So little crooks are okay, big crooks are stifled. What it also stifles is the legitimate investor seeking a legitimate construction loan. 100K property needs 100K in repairs and will then be worth 300K. I.e a normal business practice. However the construction loan is capped at 120K.
I've run into that, explained it to Fannie, and received a waiver.

Not bad for a day's work! Seriously though, I've listed over 250 REOs, and I have only had O-N-E that was flipped immediately for profit without value added changes being made (he made just under 20% profit minus commissions). I had another one that the buyer held onto for the requisite three months and then sold for a profit.

BTW, I was not the buyer's agent in either of those, so I don't know if the investors purchased with the intention of flipping or if something developed during escrow.