PropertyRadar Community

Fannie Mae Grant Deed Restriction

We have all heard about the anti-flipping rule imposed upon us investors for subsequent FHA buyers, BUT has any heard of an actually grant deed restriction when purchasing directly from Fanniemae?

I recently purchased a home from Fanniemae, refurbished, and am now ready to market. Today I check the mail and read the grant deed which states:
?Grantee?prohibited from conveying?property to a bonafide purchaser?.for value greater than X?.for a period of three months??

This appears to restrict more than just FHA loans in within three months. They are restricting the conveyance in general, if over their threshold in the three month period. This is outrageous.

  1. Has anyone else come across this?
  2. Shouldn?t the title company or Fanniemae notify the buyer of such restrictions?
  3. Is this legal and valid? Any recourse if this is not disclosed ahead of time?

This may sound flip, but next time read the deed before close of escrow. You likely could have had the restriction lifted as it seems unreasonable to me. If you think the seller or title company purposefully hid this from you then I would certainly raise the issue and ask for a new deed without the restriction.

At a high level I believe a deed can be restricted in many ways, so long as those restrictions are not otherwise contrary to law (for example restricting you from selling to a person of a particular race). But remember, I’m an investor, not an attorney, so seek legal counsel if needed.

Check you state laws, but I believe that this is an unenforceable clause anyway. NO ONE should be able to tell you what you can do with the property once you have taken title. Otherwise, Fannie Mae is creating a cloud on title for 90 days. Funny, how they don’t like it when the shoe is on the other foot, but then keep us from helping them by creating bogus restrictions.

Why I understand your position, the reality is that most deeds carry some limitations as to what you can do with your property and they are enforceable. For example the grantor may keep mineral rights, or subject the purchaser (and all subsequent purchasers) to CC&R’s.

I am an attorney that handles most of Fannies foreclosures files from Lis Pendens to Closing. I hate to be a party pooper, but it is cleary written in the contracts if their are any restrictions and exactly what they are. WHY DON’T PEOPLE READ WHAT THEY SIGN ? This is a problem, one reason we got into this real estate crisis. Always consult counsel when you are doing any major purchases, in doing so you may actually understand what you are signing and avoid getting screwwwweeeeeddd…

Thanks for the insight JD!

I am purchaising a condo from Fannie Mae, which have a Short Term Deed Restriction “I cannot sell the property for more then 120% of the purchaise price whith in 3 month”. What do I do after the three month, if I am ready to sell it (would the restriction be lifted, or I will have to register a new non-restrictive deed, in order to sell the property)? The property is located in Oregon. Thank’s.

Check with your title company after reviewing the exact wording of the restriction, but typically you don’t have to do anything.

Correct, most deed contain limitation or restriction - the primary difference that that for mineral rights or seller retained rights, the Seller is actually retaining some rights, here the Seller has no legitimate interest in the property after sale.

Also- beware of Fannie Mae forcing buyers to sign a Owner Occupancy Addendum agreeing to a 10,000 penalty if they not reside there for 1 year except for extenuating circumstances. So basically a buyer pays Fannie’s asking price, moves in and if they want to sell anytime in a year or even move out they have to weight if the reason for not moving or selling is ‘extenuating’ in the eyes of Fannie - Absurd. People have got to stop Fannie on this stuff

From what I understand as a buyer this clause would protect us from Investors who may try to gain a whole lot more. Without this clause it would be likely to cause another foreclosure due to inflated appraisals. I think 120% is substantial for flipping a property within 90 days.

Hi JK - isn’t it a little ridiculous to think that investors have the power to force buyers to overpay or get appraisers to inflate values? If I buy a house for $100,000 that is worth $200,000, why should a buyer not be able to finance it for what its worth? Do you really think the buyer should be “entitled” to buy it for $120,000. Why is how much profit the investor made relevant at all? Good for the investor if they find a great deal… why punish them, and the buyer who may want the home at a fair market price?

My client bought a fannie mae propery with the 90 restriction. Can he list it and just not close on the property until after the 90 days? Any suggestions would be great!!

Hi Sheila, You can list the property but it cannot close until after the 90 days. A friend of mine purchased a property like this and in the informational notes on the MLS it said cannot close until X date.

Is there a deed restriction for fannie mae purchased homes re amount (%?) it can ve resold for??? Help!!!

If you want to be an attorney, first learn how to spell. It’s “there,” not “their.” So much about reading what you sign.