Illegal?
I have a friend who, as we were talking told me she was selling her house. Of course, I couldn't just let that go, so we started talking about how she could make money on the deal. She came back later and told me that her real estate agent told her she cannot refinance and get her equity out of the house while it's on the market and that she had to wait six months after she pulls it off before she can refinance. Is this true? I've never had to face that question before, has anyone else?
Also, everytime I get her to take a step, her agent tells her I'm taking advantage of her and what I'm doing is illegal. How can I stop her respectfully. 
I dont know what else you are doing but the refi is no ones buisness, ask her to have the agent put that in writing, company letter head would be nice.
All I'm doing is helping her set up some rental property. Turning her house into income. I am not doing anything illegal, nor am I making any money off of this at all.
Thank you for your answer. It was very helpful.
The company letterhead would be nice. Your friend should call the manager to "check out" the Agent's claim.
There are some laws about not being able to do a home equity loan shortly after you just did one. I do not know but i believe you must wait a year to refinance a HELOC. This has nothing to do with the Realtors advice unless they are confused. Tell him to go &^&^$%#$@ and mind his business. She should just cancel the contract and do what she wants.
Good LUCK and HAPPY HOLIDAYS
Hope this helps some
Ted Jr
The realtor is just protecting their own commission that she signed a contract to pay if he/she found a willing buyer. Wouldn't you be upset too if you were in their position and someone was trying to end that contract?
Chase
Actually, the agent may be a little confused and trying to protect her commission, too.
There is nothing illegal about refinancing a property. However, most lenders will not refi a property that is currently listed on the MLS. As for the 6 month waiting period, that again would be up to the lending company.
I, too, would ask the agent for a written clarification on what exactly she is talking about.
Roger
Thanks guys for all your advice! The property has been up for sale for almost a year now. The agent has shown the house four times during that time. I sat down with my friend and did the math for her. I showed her how much money she could be making. She's ready.....so how do you "fire" an agent?
If it's been over a year, I'm wondering how long the contract was for. Usually contracts are for 6 months tops. Has she resigned additional contracts or is the contract void now and perhaps the realtor has not stopped?
If I may weigh in with another opinion. The agent may be partially correct.
Applying for an owner-occupied refinance loan, while the property is listed for sale, may be evidence of loan fraud. Because the property is on the market, the seller is demonstrating intent to sell the property and NOT occupy the property for one year as a principle residence.
In this instance, falsifying the loan application to obtain an owner occupied loan rate might even be a federal offense if the loan is federally insured. Don't know where that agent came up with the six month moratorium rule.
You don't say exactly what you are doing to assist your friend, but your actions may be tortius interference with a contract. While not necessarily illegal, you can be sued in civil court for any damages the agent might suffer (her commission on a full price offer, for example) plus her legal costs.
Your friend should review her listing agreement with the real estate broker. In most cases, the listing agreement has an expiration date after which the agreement self terminates. In many cases, the listing agreement contains language that permits either party to unconditionally withdraw from the agreement in writing without penalty.
If the property has not sold after one year on the market with no offers, the broker should have no issue with cancelling the listing agreement. Your friend just needs to ask.[ Edited by DaveT on Date 12/14/2003 ]
Hey Steena,
Have your friend draft a letter saying that she wants to cancel the listing, simple as that. If she wants she can go into details about how it has been a year, very few showings, etc. Remember, agents are in a service business. I have never seen an agent say, "NO, you must continue to have your home listed with me for the next X months."
Agents really do not like confrontation, if they do she can use the facts about the house not selling.
I think the six months thing was to deter my friend from taking the home off the market to refinance. DaveT has an excellent point. They've been paying on this house for 8 years at $640 a month. With the equity alone they can almost buy the other house. So if the bank knows she is refinancing to buy another house (that she'll finance at her bank as well) and lease the one she has out, all should be well.
I also was under the impression that you could cancel the agreement anytime you wanted, with out penalty. I would like to know what the outcome of this is.
The ability to cancel an agreement depends on the agreement itself. It is possible that it will cost to get out of the agreement. A simple letter doesn't always do the trick.
Have the seller read the agreement. Also, Brokers are people too. Talk to the broker and explain why you want out of the contract. There shouldn't be a problem.
I am a mortgage broker, so I know the answer. If the house is currently on the market, the most lenders will not refinance it now. It your friend will take it off the market now, she still has to wait for six months to refinance. That is the correct answer. So, the realtor is not lying to your friend. This is a relatively new rule by Fannie Mae (they set most of industry standard). I believe it came out two years ago.
Unless it was FISBO, you can not hide the fact that it was on the market, since lenders and appraisers have access to MLS.
We sometime get calls from frustrated homeowners who cannot sell their home, so they want to refinace instead, but we cannot help them, if thier houses are on the market. In this kind of case, we usually reffer very experienced agents who can sell the houses very quickly or tell them to offer their potential buyers some kind of creative financing.
[ Edited by SmileyFace on Date 12/15/2003 ] [ Edited by SmileyFace on Date 12/15/2003 ]
Thank you very much. I really appreciate that. She should still be able to lease the home right? We just need to alter the plan alittle. Besides, it will give her six months to buff up on the business!
New Question Smileyface.....Does the fact that it was for sale six months ago and didn't sell (or the contract was cancelled) effect the loan? And will having renters in it making the payment reverse the damage done by that?
It does not matter, if the house did not sell. No damage done here. When she refinace it, appraiser will look at recent sales (similar properties) in the neiborhood and come up with the FMV of the subject property.
Another thing. Does she plan to lease the property before refinancing? If so, she is turning her OO prop to investment property. That means she will get highter rate than OO. Just keep in mind of that.
By the way, I am very curious. Why didn't it get sold??? Did she want too much for it??
I'm not sure why it didn't sell. It's a 3 bedroom Traditional in Austin Tx for $136,000. Not a bad neighborhood, Round Rock. It's simple and plain. New carpet and tile in the upstairs master. It's not an ugly house, I'd buy it. I'm not sure the real effort was made to sell it. I would have made an offer already, but I don't work in that area, and I'm not confident enough in my skills to govern something 200 miles away........ yet.
About the interest rates...I don't know what she'll do anymore. She will probably wait the six months. I've given her a list of cheap improvements she can do to the house to add attractiveness, value, and better rent monies. A little "stacked trim" here, new cabinet facing there, taking the carpet out of the bathroom and adding tile...it will all help.
Any suggestions?
Any one else have info on this?
Canel if you can. This realtor sounds lazy, shown it 4 times in a year??!!! Please, they don't deserve to get paid. Too many realtors are BAD marketers - they just expect the MLS to sell it for them. They don't treat their job like the "personal service corporation" (as Brian Tracy puts it) that it is.
Get out of that contract if possible, and move on. Doesn't sound like your friend is that interested in selling anymore anyways. Happens every day, Dave
She lost hope. We gave it back to her. I told her what's been said here and ask her to come visit so she can see for herself. She's going to cancel her contract if she can (and if she can't..it's almost up anyway...what's the agent going to do?!? Sell it?!? LOL!) Small improvements on the home will help her lease it out.
Course of action question...Should she refinance the house as rental property and use some of the monies for "fixing it up" or should she do some small, inexpensive things to the house (before refinance) that would make the appraiser go outside the normal neighborhood circle to find matching properties (possibly getting more for her house) ?
How do you know if your loan is federally insured?
What about all these lease/options where the owners moved out and you lease it out on a sandwitch lease. Didn't owner move with a OO loan in place? Isn't that breaking the law?
Since I know very little about this....I'll try and answer you...LOL
I think it comes down to intent and opportunity. Did you apply for OO and then use it as investment property? Or was it natural course of action?
What do you think guys?
Interesting, I had a house that I pulled off of the market last December. I refinanced it last April. No on ever mentioned anything about not being able to refi because it was on the market less than 6 months previous.
Of course 'industry standards' are not laws so if a lender wants to do it then they can.
For once I know the answer to this first hand as a loan officer and processor when i worked at a mortgage broker 2years ago. The agent in this case in 100% correct (I know its a rare occurance because i know from personal experience that usually they are troublesome) the underwriters for the lending institutions ie. countrywide, gmac, wells fargo etc. will not do a refi for a customer if that home is currently on the market or was in the last 6 mo and for some lenders a year because it red flags them that she may have financial distress which they will not touch with a ten foot pole! sorry I lost many a loan as a loan officer this way and deals always fell through when i was a processor for the other lo's in the office. sorry i know thats not what you wanted to hear
flatbrokeandbusted
In regard to the OO question a couple of posts ago, I too was a Loan Officer (mortgage consulant if you please) until I realized I had suddenly no money.
Most programs will require that you be in the house for a period of time, then you can move out and do anything you want with it... I think FHA only requires OO for one year. Conventional programs are probably similar and will vary by lender, so if your friend has been in the house for 8 years, there would be no worries.
Seems like she should be in great shape if she is only paying @$650 per month now and her value on a one year LO would be @ 140K- What are comps for rents in the area? $1200, $1300 for a LO? Damn good spread.
As for fixing it up, maybe she can offer a discount on the rent if the new occupant does some of the work out of their own pocket, or better yet, simply reduce the option price subject to improvements they make with the OK of the owner...
Ok,
She should be able to cancel the contract and to go a smaller bank and refi fairly quickly. Look for a bank that does not sell the loan, they do not have seasoning issues and probably do not have to use the federally insured guidelines.
Smaller equals easier to deal with. I have said this many times, forget the mortgage brokers (sorry guys) and go local for creative REI lending.
[addsig]