Wells Fargo Short Sale Affidavit: 90-day Resale Contingency (Deal Breaker)

The Seller and I attended closing today but the investor Buyer has decided not to sign the Short Sale Affidavit, due to the 90-day resale contingency.  The  investor buyer would like the terms regarding resale to be removed from the affidavit.  The transaction is now a dead since Wells Fargo's position is that no omissions or alterations may be made to the Short Sale Affidavit.  I have spoken to my assigned Closer and also left messages for his manager regarding this matter.  Any recommendations on next steps to take with Wells Fargo to save this transaction? Please advise.

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The 90 day resale restriction is common.  I don't know why real estate (buyer's) agents will bring a wholesaler/flipper into these short sales.  We make the buyer sign an acknowledgement up front as to resale restrictions, due to all the offers I've gotten from flipper wannabe's.  Sorry, I can't think of a way top get around this.  If the investor had his exit strategy planned out, he would be assigning his interest in the LLC he used to buy it with, to avoid the resale restriction.

Your best strategy is through the buyers agent.  It's going to take the Investor some time to fix the property up. He can market the home to new buyers with a clause stating close of escrow needs to be 90 days from x date.  If he flips the home anyways, likely the new buyer will have to get 2 appraisals and he may have trouble getting it to appraise.  Show the buyers agents the comps today showing them that their client is getting a great deal.

No way around it.  

You can count on this from Wells Fargo and any other lender with almost every lender. All of the bailout programs tightened up their requirements, and in order to prevent immediate flips in as is condition make this a provision of approval to first let an owner occupant have first shot, or to make sure something of material value happens prior to a flip. Otherwise MI will not pay the shortfall claim.

A savvy investor will know this, because this has been happening starting with HAMP several years ago. Mortgage Insurance companies started demanding this, prior to paying loss claims of the investors and lenders, to insure against equity skimming, This and the subject to or assignable contracts are closely scrutinized by lenders who are looking to minimize loan losses.

Lou Farris, MBA, Realtor® CDPE®
Your Castle Real Estate


Talk to your title company.  I have on occasion had the title company rep contact the short sale department and refuse to insure over that condition.  If your relationship with title company is strong ask them to have someone from the title company's legal department or compliance department contact the short sale lender/servicer.  Doesn't always work but I have had much sucess using this strategy.

Hi Sondra:

Was the investor intending to resell the property to a third party? And did you/they have a buyer for the investor at closing time?  Or were they going to buy and hold the property?  If they were looking to resell to another party, the investor buyer could have released his contract to the new buyer for a fee and not had to have to closed on the property.  The end buyer would pay the investor,outside of closing since the investor buyer is no longer a party to the transaction. The end buyer would then submit their contract to the lender for final approval. I would not leave it to the lender to solve this problem under any circumstances!!  James Graham, Sunburst Redevelopment LLC

I know people say never say never... But I have never gotten around this issue and my investors realize with fix up, marketing and time for closing the 90 day rule means nothing.

What type of Loan does the Seller have?  FHA, VA, Fannie, Freddie, etc?

I agree with what has already been said here. Banks have had a flip rule for a few years now. Most seasoned investors already know this. The only way I know to get this completed is to let the investor know that because of the time to rehab a flip, get a buyer into escrow and close can take a while, as long as he does not record prior to the 90 days, he is ok. We have closed many deals with investors by recording on day 91 with no complaints from the investors or banks. The bank will not be able to shorten their restrictions since they are driven from another source. I know that BofA and I think Chase now have lessened that time to 30 days but Wells has not so he will have to plan accordingly. The banks want to recoop as much of their loss as possible and do not want to leave money on the table for an investor to reap.



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