Flipping Foreclosures In Vogue Again?
This from CNBC and the how to buy foreclosures newsdesk this morning: FHA and Fannie: Pushing Foreclosure Sales.
Note: While this may certainly be good news…it should be tempered with a bit of caution. Why? Because BEFORE you go out trying to buy everything you can get your hands on with hard money, understand that you still may have a hard time finding an end buyer who can get financed. Well..that is unless you can get your buyer into an FHA program and in that case…game on!!
Starting today home “Flippers” are now welcome at the FHA.
That’s right, with a glut of foreclosures plaguing the nation’s neighborhoods, the FHA is temporarily removing restrictions on investors who buy and sell homes within 90 days.
It’s just for one year, but Flippers are no longer persona non-grata with the government.
“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” FHA Commissioner David Stevens wrote in a statement last month. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”
So the FHA wants to encourage flipping and turn first-time buyers, who are already getting a tax break, into new real estate speculators? Nope, they just want to get as many foreclosed properties as possible off the market. This opens up a whole new bundle of buyers to current real estate investors who previously couldn’t flip the home to a low-income borrower.
The FHA is lifting the ban for just one year and there are some rules.
You can’t flip the property for more than a 20 percent profit in most cases and the transaction must be at “arms-length” so friends don’t collude to drive up the home value and then snag some unknowing buyer in the end. While banks and financial institutions were always excepted from the rule, private investors, like Oregon-based Gorilla Capital, were not, so this waiver, “will allow companies like Gorilla Capital, who research, assess, and purchase homes at foreclosure auctions, to sell more homes to buyers using FHA financing,” says the company’s CEO John Helmick. “With an average hold time of 52 days, the FHA 90-day seasoning rule created an artificial barrier to Gorilla selling homes to the general public, and prevented a large portion of the public from accessing the value home prices offered by Gorilla Capital.”
And that’s not all the government is doing to help buyers soak up foreclosures.
Fannie Mae announced it will offer 3.5 percent seller assistance for buyers of its HomePath properties, that is, foreclosures Fannie now owns. This can be used toward closing cost assistance or appliances, and it’s only for owner-occupant buyers who close on the property before May 1, 2010. Today, the Obama budget clearly put the kibosh on seller-assisted down payments, which is essentially what this is, so I guess what’s good for the goose is not good for the gander, that is if one of those birds is government entity.
Both the FHA and the Fannie programs, while temporary, are designed to spur home buying and particularly buying foreclosed properties.
Now is as good a time as any to learn how to buy foreclosures.
Other Sources:
The FHA flips on a policy Seattle Times, on Fri, 29 Jan 2010 22:18:34 -0800 FHA maintained its 90-day anti-flipping rule through much of the last decade. But now it’s suspending the policy, at least for the next year. …
F.H.A. Lending Standards Tightened New York Times, on Fri, 29 Jan 2010 21:04:53 -0800 In the past, buyers could not consider an FHA loan for any property that had changed hands within the previous 90 days. This “no-flipping” rule blocked …
FHA and Fannie: Pushing Foreclosure Sales CNBC, on Mon, 01 Feb 2010 10:07:28 -0800 So the FHA wants to encourage flipping and turn first-time buyers, who are already getting a tax break, into new real estate speculators? …
FHA Lifts Flip Rule, Making Homes Easier to Buy KLAS-TV, on Mon, 01 Feb 2010 16:26:15 -0800Then, after investors flip the homes, buyers are pushed out again because FHA wouldn’t back the loans. Real estate expert Mark Baker says half the homes …
Flipping Foreclosures with FHA Loans Now Permitted HULIQ, on Tue, 02 Feb 2010 06:05:12 -0800Foreclosure investors have been frustrated by FHA mortgage loan rules prohibiting “flipping” – buying a home and then selling it within 90 days. …
