If the borrower receives cash back, the lender will need to confirm that the minimum borrower contribution has been met. The money can also be used to give the borrower cash back for a pro-rated real estate tax credit if there has been an error. This settlement must clearly indicate that this matter has been settled through the refund. However, the borrowed money cannot be used to give the borrower cash back unless it is the amount representing reimbursement for overpayment of fees. The proceeds can also be used to convert a construction loan into permanent financing, or pay off the outstanding balance on installment land contracts. For example, the borrower can use the funds to finance the acquisition of property or both the acquisition and rehabilitation of the property. If these contributions are met, the proceeds from the transaction can be used for many different purposes.

There are often different eligibility requirements for various loan products, and these differences will be stated in the specific mortgage loan they should be explained in detail by your lender.įor general purchase transactions, the minimum borrower contribution (down payments) requirements will need to be met. These guidelines apply to many forms of lending, including purchase transactions for a wide variety of properties… Requirements for a General Purchase TransactionĪ purchase transaction, also called a “purchase money transaction,” is a real estate process where the funding is used to purchase the buying of a property or to both buy and remodel or renovate a property. However, Fannie Mae has specific details for loans, and lenders who wish to have their loans purchased by the real estate giant need to make sure their loans fit into specific guidelines. They create greater confidence for lenders, which means more available money for borrowers. By purchasing loans on the secondary market, Fannie Mae ensures a readily-available supply of money for borrowers. As you can imagine the data is only as good as it is inputted, and if appraisers aren’t doing their due diligence in reporting accurate data, this could lead to those appraisers that are doing it right to potentially have to explain themselves as to why their data doesn’t match so and so’s appraisal.If you are looking to complete a purchase transaction for a piece of real estate, you’ll need to make sure that you meet specific requirements, especially if the loan is going to be supported by Fannie Mae.įannie Mae, a government-backed company, provides financial support for the American real estate industry, which is generally viewed as an important part of quality-of-life standards. In my opinion this has the potential to cause all kinds of problems, depending on how they decide to use the data. From what I’ve been told by different “real estate mavens”, this is supposed to prevent future problems regarding appraisal values.

Implementing the UAD changes will give the GSE’s, and HUD starting in January, the ability to data mine appraisals and create a huge data base. “An arm’s length transaction is characterized by the following (1) the absence of a relation between the buyer and seller (2) a selling price and other conditions that would prevail in an open market environment (3) transaction costs paid by the seller that are considered both reasonable and customary for the market in which the property is located and (4) the adherence to ethical standards of conduct by all parties involved in the HECM short sale transaction, including the borrowers (or the estate), mortgagees and appraisers.” “ A transaction between unrelated parties who are each acting in his or her own best interest.” These are the types of transactions that lender’s believe constitute and make-up “Market Value” as defined by Fannie Mae and HUD.įrom The Dictionary of Real Estate Appraisal 5 th Addition Appraisers are required to identify whether the sale is one of the following: a short sale, REO, court ordered, estate sale, relocation, non-arm’s length transaction, arm’s length transaction, or a listing.ĭefinitions of an arm’s length transaction:Īn arm’s length transaction in real estate is when neither party involved has no relationship between each other, and is acting in their own best interest. The GSE’s (Fannie Mae and Freddie Mac) and HUD (FHA) have gone out of their way to identify whether the comparable sales used within an appraisal are arm’s length transactions with the advent of the new UAD requirements. Apparently not all appraisers must be doing this, because I get a lot of Realtors telling me that this is first that anyone has asked them these questions. For all of my appraisals I always contact the agents involved to verify if the sale actually closed, and whether it was a arm’s length transaction.

Arms length transaction fannie mae