Banks w'd not finance a buyer if seller bought a property at Trustee auction if u make 20%?


#1

Had a property pending and we were supposed to close escrow last week. The buyer’s bank (BofA) sent a 2nd appraisal and is asking for documents to proof we are not making more than 20% profit on the property which we purchased at court trustee auction in June.
they say it is a new rule ?
Have you heard this before? Does anyone have a copy of this new ruling?
Now they are controlling your profits ! I guess they want to push the short sales


#2

It is a Bank rule not a Fannie Mae or FHA rule. Have the buyers change lenders.


#3

Here is a great article on the 20% profit rule which not all lenders are are following.http://bestfolsommortgage.com/the-90-day-flip-rule-some-lenders-have-one-while-other-dont/


#4

We came across this 20% rule with Bank of America earlier this year (2010). They were concerned with the selling price vs our cost not because they were trying to control how much money we are making, but more from an appraisal/loan issue.

Their concern was that if you purchased it for so low, how can this house sale for so much. They are hesistant to fund the loan for a house that is so “over-priced”.

We actually got B of A to over-look this issue and go ahead and approve/fund the loan by explaining to them why we purchased it fo so low.

1.) Purchased at Trustee’s Sale. These houses usually sell for less than market, because we are taking great risks… sight unseen, eviction, legal fees, damage to house, etc. Since so much risk, hence low purchase price.

2.) Spent considerable money remodeling the house. So, the actual “cost” of the house is not what is recorded in the TDUS. You have to add our remodeling costs (and other expenses) to get the true cost of the house.

3.) The selling price is consistent with market values for that area. Provide comps to support this.

4.) If you received multiple offers, state the offers and hopefully the offers are all in the range of the price you are in escrow with. This supports that this house does indeed have that value.

In about a week, the bank accepted this explanation and proceeded to process the loan. We closed escrow 2 weeks later.

Hope this helps.

Jimbo