"The Summer Selling Broker Bonus is not eligible on
investor purchases."
This is what
Sandra Watkins, my Realtor in North Metro
Atlanta, said to me.
As Sandra pointed out, the work she puts into getting a
house sold to an investor is the same as it would be for a homeowner buyer. So
why not give her the Summer Selling Broker Bonus for getting the house sold?
This policy makes no sense.
Bank Owned Homes /
Foreclosures
It is bad enough to make it harder for investors to buy
and renovate properties but it is even worse to discourage Realtors from working
with investors. We are living through some difficult economic times with a huge
real estate crisis on our hands. Properties are vacant and facing foreclosure if
they are not yet already bank owned.
The 90 Day Rule and Vacant
Housing Inventory
Another factor that is slowing investors down in clearing
up the excess vacant housing inventory is what is commonly called the 90 day
rule.
HomePath Renovation
Loans
I recently got a house under contract that is eligible for
a HomePath renovation loan. I will be closing on it in a few weeks. I have
noticed in general that when a HomePath property comes on the market in North
Metro Atlanta, it is not
eligible for purchase by investors for a few weeks. This is supposedly to allow
homeowners time to get the first opportunity to purchase the house before
investors swoop in and make an offer.
Uninhabitable Houses
What usually happens is that the time goes buy without any
offers from home buyers because of the amount of work needed to make the
property habitable. The house then becomes available for purchase by investors.
I presume that after the period of time which the property is available to home
buyers and it doesn't sell, the banks and FHA recognize that investors are their
best option for getting the house off their books.
So now I have a house under contract which the bank agrees
must be purchased by an investor. They acknowledge that the property needs a lot
of work. They are supposedly happy that an investor has come along to solve a
real estate problem which is a blight in the community. So what do they do next?
They send me a statement to sign which says I can't resell the property within 3
months of purchasing it.
Home Renovation and Resale /
Rehabbing
Now, you should know that I have worked
hard as an investor for years to set up my business. I have contractors in
place who are hungry to work and make money renovating the house. I can fix
up and rehab
this house up within 30 days to get it on the market for resale. I can
attract buyers who want to buy a fixed up house to buy. They can
close within 30 days. I can have this house resold within 60 to 75 days of
purchasing it from the bank.
Deed Restriction
I am PROHIBITED from reselling the
property within 3 months because of a deed restriction in the purchase
contract. A copy of the deed restriction language in the sales contract is
reproduced above. This deed restriction is also called "title seasoning".
Holding Costs
The deed restriction means I have to calculate the extra
holding costs (taxes, interest, insurance, utilities) into my equation thus
I must offer less money to purchase the house in the first place from the
bank who wants to sell it for as much as they can get.
But wait, there's more time delay!
FHA Lender Restrictions
I have learned from experience that a
home buyer will not qualify to get an FHA loan on my investment property
unless the contract is dated 91 days after I purchased. So in fact, I need
to add another 30 days to my holding cost equation because it will take that
much time for the bank to do the paperwork needed to get their client
homebuyer to closing. So minimally I will be holding the property for 4
months which is twice as long as it would take if I was not prohibited from
reselling it within 3 months.
"The Summer Selling Broker Bonus is not eligible on
investor purchases."
This brings me back to where I started.
Homebuyers are not buying the worst highly distressed properties that need a
lot of work to be habitable. Realtors could use some investor buyers to make
offers, but they wont get their bonus if they sell to an investor.
Clearing Up Vacant Housing
Inventory
All this makes no sense. The rules and
policies that dis-incentivize investor activity to clear up the vacant
housing inventory is slowing down the recovery in the housing market. Or am
I missing something?
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