Real Estate Gurus - Question here
 

i just made an offer on a property. they said theres a deed restriction and they send me this when i asked about it:

"deed restriction will hinder the Buyer from selling or re-financing the property for more than 120% of the purchase price for the first 3 months. After 3 months Buyer can do whatever he/she wants and deed restriction is lifted. "

does that mean exactly what it says or is there more to it? and why would they even do that in the first place?

Consult your realtor or a real estate attorney. :2 cents:

Speaking from experience,I would walk away from this deal

They put that inplace so you can't purchase the property and immediately flip it to another buyer. This is actually common . Some buyers will purchase properties and already have a buyer lined up. This is to keep you from swinging an immediate profite which could limit the present owners profits on this property. And keep you from making the buck instead of them.

Deed restrictions are typically pretty cut and dry and they mean just what they say. In California for example they use an example on state broker exams that a seller says alcohol can't be consumed on the premises for X amount of time, so if the seller discovers that alcohol has been consumed on the property then the property reverts back to the seller. Likely a restriction on flipping properties. I've never seen this is California, but that doesn't mean it doesn't happen. Couple things to look at are, whether you really think the prop is going to appreciate that much in the first 3 months and why you're buying it. If you plan to live there than a restriction on the 1st 3 months shouldn't matter. But ideally you should consult an attorney if you really want it, otherwise I'd walk.

flip prevention

that makes pretty good sense, i was planning on fixing it up and renting it out anyway. the house needs tons of work so it will take 3 months to even fix it up. i guess what i'll do is accept the offer with the deed restriction and if they accept ill talk to an attorney first then if it doesnt work i'll use the private inspection contingency to back out if i need to.

He is right! They seller does not want you to flip the property with in the 3 months. You might want to find out why.

So why should the seller care or even have say in what a potential buyer does once the property is sold?

i asked the listing agent and just heard back and they said

"Seller is trying to avoid fruadulent real estate activity in the Detroit metro area which is statistically high. "

doesnt make very much sense to me, but im going to go see a lawyer if they accept my counter offer with the deed restriction.

Crap. It's not the vendors right to have opinions on anything once they sold it. Whether there is a claimed valid excuse or not, suggest you have that removed then consider buying the property - else walk away.

More crap - since when was a realtor honest? What's the seller? A law enforcement agent with a dedication to cutting down fraud in Detriot?

Nobody else counts - the only person who matters is your lawyer beemk :thumbsup

In Detroit? Yea probably a lot of mortgage fraud in Detroit. People buy a shit house for $15k, get fraud appraisal for $100k, and walk away. Mafia and organized crime does this type of shit and on huge scales usually.

With a restriction like that, I would lower the offering price in consequence of financing the property for there months (three monthly payments of a full value mortgage), because the property is basically frozen for that time frame.

I would use it as another reason to negotiate... "I made a bid of $200k for the property assuming there were no restrictions, given this restriction, I can offer only $195k" or something along those lines, but consult your attorney for more details...

Do you WANT to sell it within 3 months? If not, then don't worry about it.

A lot of people are buying houses and then getting inflated (false, bought) appraisals on them, then refinancing or selling based on the inflated appraisal, mortgage doesn't get paid, house is vacant, vagrants move in, neighborhood looks like shit.....it's been happening in ATL and other big cities. I'm not surprised to see this in a contract, but surprised it's only for 3 months.

yeah, there are actually deep frauds involving sham lenders or identity thieves buying houses with a mortgage on someone elses back, then they flip and fly. sometimes neighborhoods have restrictions on flip rates or cooperations- tends to keep the uninterested owners out. people with nothing but 10% down equity invested in a second property wont give a shit if they leave consruction shit in the yard or whatever (its not their neighborhood). there are some loans that restrict selling options as well if memory serves. its pretty common.

From my experience everything is up for negotiation unless it is apart of a Body Corporate situation.

Use it to your advantage!

call a lawyer...I can tell you that much...

Perfect advice.