Real estate has lots of terminologies and it can be difficult to keep it all straight. This post will take a look at sales restrictions and will explain what they are, how they work and how they can impact your real estate purchase or sale.
First, let's define what a sales restriction is. When a property has "sales restrictions", it means there are specific conditions that must be met in order for a property to be sold. For example, in some cases, only certain buyers may purchase the property. In other cases, the property can only be sold for more or less than a stated price.
Here are a couple of examples:
- Property endowed to a university may only be allowed to be sold to someone belonging the academy's faculty.
- A buyer who purchased their current home with the help of a first-time buyer's program may only be allowed to sell that home to another first-time buyer at a price not to exceed a certain profit margin.
Listing Sales Restrictions on the MLS:
To list on the MLS, you will be required to note any restrictions on the sale of your property.
Here's a quick explanation of each restriction.
- None Known:
The owner is not aware of any sales restrictions on the property. This is the most common situation.
- Call to Ask:
There is a sales restriction, but the buyer must call the selling to learn what it is.
- Court Approval Required:
The court must approve any offer prior to a transfer of ownership. Generally, court approval is required if there's concern that the home's price is not representative of fair market value. Examples are bankruptcy sales, probate sales, and guardianship sales.
- Deed Restricted Program:
There is a written agreement that limits the use or activities that may occur on this subdivision of property. These restrictions appear in the records of the county in which the property is located. They are private agreements and are binding upon every owner in a subdivision. All future owners become a party to these agreements when they purchase.
The seller is a representative of the heirs of someone who has died. If the owner died without naming an heir, an estate sale is called a probate sale (see below).
- HAP (Home Assistance Program):
HAP is a military program that assists eligible veterans when their home declines in value due to a nearby base closure.
- Housing & Urban Development:
The U.S. Department of Housing and Urban Development is selling the home.
- Need Short Sale – No Lender Knowledge:
A short sale would be necessary to sell the property, as the property is worth less than the amount owed to the bank. In addition, the bank has not yet been told the owner is seeking a short sale.
- Notice of Default Filed – Foreclosure Pending:
The bank is actively in the process of taking the property back from the owner.
- Pre-Short Sale Package Submitted to Lender:
A short sale would be necessary to sell the property, as the property is worth less than the amount owed to the bank. In addition, the owner has requested the lender's approval of the short sale.
- Probate Subject to Overbid:
The homeowner died without an heir and a court has appointed someone to sell the home. After the estate accepts a price, the sale must be court-approved. At the hearing to approve the sale, other potential buyers may bid over the accepted price.
This phrase means the lender is selling the property after an unsuccessful attempt to sell at the foreclosure auction. In most cases, the property failed to sell at the foreclosure auction because the owed to lenders is more than the property is worth.
- Short Sale Approved:
The lender approved the homeowner's request to sell their property at an amount below what is owed to the lender.
There is a sales restriction other than those listed here.
Hopefully, this list gave you a good grasp of what sales restrictions are, how they work and how they can impact your home sale or purchase!
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