Thinking of flipping a short sale? It might not be as easy as you think… keep reading for more info…
When FNMA (Federal National Mortgage Association or Fannie Mae) is the seller of a property, there may be a restriction against a quick resale or refinance of the property. This restriction would be found in the sales contract addendum and in the Limited Warranty Deed and usually prohibits the new owner from selling or refinancing the property for 30-60-90 days after closing for more than 120-125% of the original purchase price from FNMA. This restriction must be in the sales contract in order to be included in the Limited Warranty Deed, and it is the listing agent’s responsibility to add this language if desired.
Another restriction upon a quick resale (usually 30 days) appears in many short sale approval letters, and the lender may reserve the right to revoke and rescind the short sale approval if the new owner ignores this restriction. This would create a huge problem and title issue for both the seller and the new owner, and title insurance may not protect the new owner who violates this restriction.
Thank you to Neel & Robinson for this tip…
