Questions about selling my FHA 3-unit - Posted by Amy

Posted by CarolFL on June 16, 1999 at 18:04:37:

Amy, First, pull out you mortgage docs. They will have the answers to some of your questions.
Next, you bought the property with an FHA insured loan, for owner-occupant, from what I gathered… and you lived in the property… I assume you were overexcited and messed up the dates (if you moved in Dec 99, I am overdue with a few payments!).

You subsequently moved because of job changes.

READ your docs, but my FHA loan did not prescribe any particular length of time I had to live there (infact, we did for about 1/5 yrs). You had defrauded no one.

Your FHA loan is probably a qualifying assumable (cheaper than a new loan)… and there should be no prepayment penalty- well, I’m not a lender, but I can’t imagine an FHA loan with a prepayment penalty … doesn’t make sense… so again, READ your docs. It will say.

Now, since the lender financing your NEW loan on the NEW property has a lien on the OLD property, that must be addressed before it can be sold. Again, dheck your docs on that lien. See if there is a release clause. Frankly, you would have asked for one after 12 months or so had you known.

My guess is that someone who REALLY knows may address this, so I will only speculate that (1) there is some release mechanism referenced and (2) if there isn’t, and if you have been making timely payments for a while (I"m still confused on the dates), you may be able to get the lender to release the property.

Hopefully, some of our oh so knowledgeabel folks will address this for you… I’m just guessing on this part.
Good luck,

Questions about selling my FHA 3-unit - Posted by Amy

Posted by Amy on June 16, 1999 at 10:26:46:

I must plead ignorance here. I saw a post below about FHA and did not realize that there were clauses for occupancy and such. (It was our first home, we were excited, did not pay close attention.)

Anyway, we bought a 3-unit house in southern Wisconsin in Dec. 1998 through FHA. We moved in December 1999 because we both got new jobs. We bought a single family 2 months ago (We rented an apartment for several months while we were looking). All 3 units in the old house are currently rented. We would like to sell it and buy another 2 or 3 unit closer to home (it’s a wee bit too far away for my liking - and it needs a new roof).

It rents for $1100/month, tax=$1300/ year, sewer and water=$50/ month, garbage=$40/month. Tenants pay own electric & one of the tenants mows and shovels for us. We have a $43,000 outstanding loan. Would like about $60,000 for it.

It does have a lien on it. When we bought our single family house, we didn’t have a down payment, so the bank was willing to give us a loan with $1000 down and a lien on the rental because the cash flow is pretty good. Our current house appraised at $120,000 and we have $117,000 outstanding.

So, several questions about selling the rental… how does having an FHA loan affect the saleability? Will we have to pay a penalty for moving and renting it out? How will the bank lien affect it? Will there be a prepayment penalty from FHA? Also, how long do we have to buy a similar rental in order to avoid capital gains taxes?

Any advice is greatly appreciated.


Re: Questions about selling my FHA 3-unit - Posted by Dick Schmidt

Posted by Dick Schmidt on June 16, 1999 at 23:09:10:

To avoid capital gains on income property, you need to do a 1031 exchange, not just reinvest the money. This is not something you can do by yourself, so read some of the articles in the “how-to” section and contact some of the experts in this field.