We recently represented an investor who purchased a Fannie Mae owned REO property located in San Jose California for rehab and resale. After waiting 2 week, Fannie Mae finally accepted our CASH offer; but shocked us with horrendous Deed Restrictions! Here are gruesome details that might shed some light on how Fannie Mae’s hostile business practices are preventing a sustainable housing recovery.
Condition 1: 120% cap on resale price of this home
Condition 2: No Resale allowed prior to 90 days
Condition 3: All inspection to be completed in 5 days
Condition 4: Deal had to be ALL cash
Condition 5: Deal had to close in 3 weeks
Condition 6: Earnest Money Deposit has to be Cash or Cashier check and be non-refundable after contingency removals
Condition 7: Sale price no contingent on any appraisal
The most damaging one of these conditions are the restrictions on the Profit and the Hold period which is INSANE!! We could potentially understand Fannie Mae’s hostile business practice if this was a Short Sale where your Asset Manager was concerned about getting the highest dollar possible for this asset. But this is an REO which had stayed on the market for more than 167 days which is considered plenty of market exposure!
Given these restrictions and our inability to get an exception, our investor cancelled this transaction. This cancellation prevented the employment of at least 5 different trades (Plumbing, Electrical, Painter, Roofer, Designers) along with a minimum of $50,000 which would have helped our local economy.
In short, we have started wondering if Fannie Mae’s charter is to help this housing recovery or prolong this crisis! We have started wondering if Fannie Mae’s charter is to help the Silicon Valley’s economy or damage it!
If you have own horror stories on purchasing REOs from banks, we would love to hear from you.