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.
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