Turn Key Properties? Get the Flip outta here!

Good Afternoon Everyone,

Friday the Us Department of Housing and Urban Development announced that beginning February 1st there will be at 1 year moratorium on the Federal Housing Administration's 90 day flipping rule. Okay, so what does that mean to you, the consumer? Well first let's examine what that 90 day flipping rule actually is:

Well a while back the Federal Housing Administration (herein after referred to as FHA) noticed a lot of fraud involving investors who were purchasing properties and quickly selling them at inflated prices to friends or associates and share the profit.

Now fast forward: in today's market with the abundance of foreclosures and no end to them in sight, we have many properties i that have shown the frustration of homeowners, homes that bear the wear and tear of the years or just even those that have suffered what we like to call "deferred maintenance" and need thousands of dollars of work. Well an investor purchases this property, rehabilitates it into turn-key condition and places it back on the market. Sounds Good right? Wrong. Because the investor has owned the home for less than 3 months, FHA will not finance a loan on the property until after this 90 day period. This means that either it will sit on the market or be taken by the few conventional buyers who have the money to pay the 20% down. In today's market, with money seeming more and more akin to an abstract idea than a form of currency, the average buyer is a consistently hardworking, middle-class, first-time homebuyer who doesn't have the funds required to use conventional financing (20% down etc.) and has just recently managed to save the 3.5% required as a down under FHA guidelines.

Beginning February 1, 2010, and lasting for one year, FHA will relax this restriction allowing more inventory to flow into the market, and more homeowners to purchase move-in condition properties through FHA. There is however a caveat to this, for properties that are sold for 20% or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions. That shouldn't be a problem, the investors need money and the buyers need homes....right? In any case I'll expect to see the average sit time of those listings reduce greatly and bidding wars ensue.

You can View the Letter Issued by Hud Here

http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf


Terms To Know:
FHA- Federal Housing Administration
Flipping- Purchasing a property and quickly reselling it for profit, usually in the span of a few weeks to a couple months
FHA Financing: the federal agency in the Department of Housing and Urban Development that insures residential mortgages
Conventional Financing- A loan secured by investors, but neither insured by the FHA nor guaranteed by VA. Both fixed rate and adjustable rate loans are available with conventional financing.
HUD- U.S. Department of Housing and Urban Development
Turn-Key condition: Referrs to a property that is constructed/rehabilitated by an investor/developer and sold or turned over to a buyer in move-in condition