Experience on new development/builders not selling to investors? (Cove: sales, foreclosed)

[unknown00]

The list is quite extensive where new development builders claim they won't sell to investors. Some claim it's HOA, other builders say HOA can't really enforce, a lot of mix feedback depending on where.

My question is - overall and in general, how do they enforce this and how do they know? Anyone just ignore this statement before? Any experience?

[tcualum]

I don't know how builders do it but the president of our HOA is a lawyer. Our HOA doesn't allow rentals so when a bank tried to rent out a home the bank had foreclosed on the lawyer sent a cease and desist letter to the bank. The bank promptly stopped trying to rent out the home.

[Listener2307]

In Texas HOA's have real teeth and can enforce their own rules if they are written as CC&R's - Covenants, Conditions and Restrictions. I had a chat with an attorney before I accepted the position of HOA president.

But each state has its own arrangement. In Mississippi HOA rules apply and they can be enforced, but there has to be a real home owners association - that's different from a group of home owners who want to force their will on someone else.

Generally, if the CC&R's have been ignored in the past they become unenforceable.

[unknown00]

Originally Posted by tcualum

I don't know how builders do it but the president of our HOA is a lawyer. Our HOA doesn't allow rentals so when a bank tried to rent out a home the bank had foreclosed on the lawyer sent a cease and desist letter to the bank. The bank promptly stopped trying to rent out the home.

Uh so what happens if an existing homeowner (such as yourself) moves? You have no choice but to sell?

[octo]

It's kind of funny how that HOA effectively demotes the home"owner" to a renter (because it's not owning if you are restricted that much) while making renting illegal.

They probably also require interior paint to be realtor beige.

[Harpaint]

Originally Posted by unknown00

Uh so what happens if an existing homeowner (such as yourself) moves? You have no choice but to sell?

Yes, or leave it empty. If you don't like the CC&Rs, don't buy there. There are plenty of non HOA properties available where you can live among renters or rent your place out.

[Harpaint]

Originally Posted by octo

It's kind of funny how that HOA effectively demotes the home"owner" to a renter (because it's not owning if you are restricted that much) while making renting illegal.

They probably also require interior paint to be realtor beige.

Nope. It helps keep the neighborhood nice. And HOAs generally don't care how you decorate the interior of your home. And BTW, landlords are the one's who paint realtor beige for their renters.

[octo]

Yes because renters are filthy vermin *eyeroll*

[Harpaint]

Originally Posted by octo

Yes because renters are filthy vermin *eyeroll*

No. Because landlords, especially from a long distance, tend not to keep the property up. No one forces you to buy into an HOA community. You can live, buy, or rent someplace else.

[FalconheadWest]

Originally Posted by unknown00

The list is quite extensive where new development builders claim they won't sell to investors. Some claim it's HOA, other builders say HOA can't really enforce, a lot of mix feedback depending on where.

My question is - overall and in general, how do they enforce this and how do they know? Anyone just ignore this statement before? Any experience?

A builder can pick and choose who they want to sell to. As long as there is no Fair Housing discrimination, they can choose not to sell to investors. Most chose this. It's because they want home owners in their communities. On average, occupied home owners take more care of their properties then renters do.

When a builder does sell to an investor, they have to make note of it as they won't go over a certain percentage like 5-10%, each builder is different.

How do they enforce it? Part of the sales contract asks if they are planning on living in the home. If they lie, and the builder finds out prior to closing, they can terminate the contract at no penalty to the builder. The buyer would lose all earnest money and any design center money for lying. If the investor actually gets through closing and doesn't get caught, there's nothing that can be done, but the "for rent" signs that pop up tell them to give the buyer's name to all their other communities so they'll be on a look-out not to contract him again.

In a house community, it's much harder to say you can't have rentals on the pre-owned side if you get relocated or whatnot. In a condo regime, they have more control to say no since there's "common" ownership.