John Marion

John Marion is a Real Estate Agent with REMAX Town & Country in Canton, GA

The 90 Day Rule

Here is a story from before I became a licensed real estate agent in Georgia.

Contract Paragraph: Grantee herein shall be prohibited from conveying captioned property for a sales price of greater than $63,480 for a period of 3 months from the date of this deed.

"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?


John Marion is the agent who buys houses in Cherokee County Georgia and throughout North Metro Atlanta
Call or TEXT John @ 703-371-9548