Friday, January 15, 2010
Apparently today the FHA has suspended the 90-day anti-flipping rule for 1 year, effective February 1, 2010. So for at least the next dozen months, FHA buyers can obtain loans on properties that have been recently purchased by investors.
This is great news for investors trying to flip properties to FHA Buyers! For the next year at least, you wont’ have to sit on your laurels waiting for 90 days on title before you can even GO TO CONTRACT with a buyer.
- Here’s the first article I read about it: “HOUSING: Feds suspend anti-flipping rule”
- And here’s the actual PDF from HUD that makes it official and takes you through the grueling details…if you like that sort of thing.
So with this, maybe the FHA just got a little less sucky. For now. And just a little.
Apparently there are a few details to be aware of, such as if the resale is 20% higher than the investor’s purchase, you’ll have to pony up some proof to an independent appraiser that renovations and repairs justify the higher price. But that’s just good standard practice to have handy as a flipper these days anyway.
UPDATE: After reading carefully through the 3 page waiver myself, I put together an Executive Summary of “must knows” every investor should be aware of…
So tell me…how do you expect this will effect your own real estate dealmaking for 2010?
JP – you wonderful, and magic Man!!!! You just made my morning, I’m doing nine rehabs right now and we’re churning them out in 60 days or less. This is HUGE!!!!!!!!
.-= Craig Fuhr´s last blog ..Got Vacant Houses? Make Them Secure. =-.
I think this bulletin is an acknowledgment that investors play a big part and will be a key to the housing recovery.
With that said, I recommend that everyone read the bulletin for themselves. My first concerns is that lenders might not adhere to the FHA ruling and stick to their in house seasoning requirement. FHA has recently subpoenaed 15 lenders with high default rate. That could scare banks and non-bank lenders to tighten up their underwriting and turn down flip transactions.
Second, I would be careful (now more than ever) how a transaction is structured (even for transactions that close 90+ days). Section 1(c) states “No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12-month time frame”. Rehabbers that buy from wholesaler (that do A-B B-C transactions) might have a tougher time unloading a property to a retail buyer who uses a FHA mortgage. Entity flipping now seems like a better idea.
Third, I see a higher level of scrutiny for all flip transactions. Flips with more than a 20% (need at least that to make money) increase over acquisition cost will need documentation to justify the higher sale price. This is not a big deal if you have your house in order (proper paperwork from contractors, invoices, etc…).
In the end, this is a net positive. I wouldn’t be surprised to see a decrease in the absorption rate and days on market around the country. Well that’s my take on it, what’s yours?
It’s about TIME! Thanks for being the bearer of good news, JP 😉 Have a great weekend!
.-= Shae Bynes´s last blog ..Real Estate Investing Bloggers to Watch in 2010 =-.
Thanks for the useful information. This blog is informative and interesting.
Do you know if contracts have to written on or after Feb 1st or does the loan just have to close after Feb 1st?
Thanks for the useful info…maybe we can get back in the market . Will these new conditions exclude any states like California?
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Great info, JP. As always!
what can you tell me about the flipping rule if the listing realtor has a financial interest in the property but he does not own the property. I am one week away from closing and found this out thru trend. the underwriter just killed the deal