lpamn9, Home Buyer in Englewood, CO

Builder limit community single family home rental

Asked by lpamn9, Englewood, CO Thu Jun 26, 2014

We're trying to buy a single family in a new development community with 120 lots. We signed the contract with the builder in April and made clear this is for investment. Since then our real estate agent has brought quite a few buys to the builder and I believe most of them are like us buying an investment property.
Yesterday the builder sales rep sent us a Declaration of CC&R states "Unless approved by the Board in writing, in no event shall the number of Dwelling Units which are subject to leases exceed fifteen percent (15%) of all Dwelling Units. Now there is a risk that we are not allowed to rent out the house.
The sales in the community is really hot and the base price has raised $40k in two months. The builder is taking a hard line and states that we can take back the deposit and cancel the contract. It seems the builder wants us to walk away and there may be something behind why they come up with the CC&R 2 months after.
Shall we bring in a real estate attorney?

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Jennifer Sch…, Agent, Centennial, CO
Tue Oct 28, 2014
The CC&R's would have been established when the builder submitted his plans for the community to the building department, which was very likely a year or two prior to offering the properties for sale. Limits on non-owner occupied units are common because the percentage of non-owner occupied units inhibits the ability for any and all buyers to obtain loans to purchase properties within the complex. In other words, if there are too many non-owner occupied units and the market takes a dive, investors who do not occupy the unit as their primary residence are more likely to stop paying their mortgage & HOA dues and allowing the banks to foreclose on their property. The more foreclosures the lower the prices drop and the more the HOA suffers from unpaid dues. So to limit risk, they limit the number of investor purchases.

You need to work with the listing agent and builder to ensure you are within the first 15% of dwellings purchased by investors. If not, you will likely be unable to get financing yourself when your lender audits the building for investor purchases.
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