The Federal Housing Administration has decided to ease up on it's anti flipping rules effective this week, February 1, 2010. Investors will no longer have to wait 90 days to sell a property that they purchased for the sole purpose of renovating it and flipping it.
There had been a 90 day waiting period before an FHA or VA buyer could purchase one of these renovated homes from an investor. The wait had previously been implmented because some "flippers" were making substantial profits on a property in a short period of time, artifically driving the price of homes up. Other flippers were caught in illegal schemes.
The Federal Housing Administration hopes that this decision will get more investors back into the market to purchase some of the nearly 3 million foreclosures available. It will also provide more opportunities for FHA and VA buyers to find clean homes, in move in condition. Typcially, VA buyers are purchasing with no money down, 100% financing and FHA financing requires 3.5% down.
But, investors will need to follow the new restrictions:
-the property must be sold in an 'arms length transaction". It cannot be sold to a friend or a relative of the seller.
-the markups on these properties must be approximately 20%. The investor must be able to justify his final sales price to a new buyer's lender. He must keep good records, and if his sales price is higher than 20% of his original purchase price, a buyer's mortgage company will be justified in hiring their own property inspector and do a thorough review of the investors documentation.
Sandy Shores REALTOR®, Melbourne/Palm Bay FL Real Estate
Brevard County, Florida's Space Coast Real Estate & Investing
I buy, sell, rent, own and manage Investment Property
that for you
That has been a great topic all week long in our office!
Thank goodness it is Friday, I hope you have a great weekend!
Paul
Sandy
Thanks for sharing the 90 day update for flippers.
Good luck and success.
Lou Ludwig
Sandy, Wow, I thought they had just made that ruling to not be able to sell so soon. It's a quick change, I'm sure they found issues early on.
I'm not sure why they lifted this. Back to some possible hi jinx, but we'll see how it shakes out.
Sandy,
Greta news for investors. I wonder how FHA plans to rule the arms lengght transaction. Tere
Sandy, this is really good news for the investors out there that are doing us all a favor by rehabbing those horrendous homes that have been let go in the on slot of foreclosures! Maybe some lucky buyers will get a great home that they can just move in to and enjoy!
Paul, I can imagine that this has probably been a topic of discussion all over the place.
Lou, You're welcome.
Carole, Oh, they had plenty of issues with this flip rule. I wonder how they are going to iron the issues out of it this time.
Gabe, I think that we could potentially have issues with this again, as we did before. I wonder how many investors are going to want to take advantage of this, when they are indicating that they markup can only be 20%. It's not going to worth it to do these flips.
Tere, That's one of the problems they had with it before. that the transactions were not arms length. Good point, how are they really going to be able to regulate that?
Caren, I agree that this will help get some of those homes in deplorable condition off the market.