Flip That House is on Once Again
Flip that house is on once again…and I don’t mean the TV show. The Federal Housing Administration just gave real estate investors who buy homes on the cheap and sell them quickly, the reprieve they have been waiting for. In an effort to stabilize the real estate market on some of the foreclosure and low income communities, the Federal Housing Administration extended a waiver on its anti-flipping regulations through 2012.
In an effort to overcome the possible effects of abandonment and blight of low income communities, the acting Commissioner of the Federal Housing Administration created the extension of the waiver. Foreclosed homes that are in low income areas tend to lower property value much lower than average and create magnets for crime and other social ills. Flippers often improve conditions in these communities by remodeling these homes and giving the neighborhood a facelift, which in turn improves conditions for the area in most cases.
The FHA is who insures the homes, and they are a primary player when it comes to mortgage lending in low-income communities. It is also possible for many of these homes not be issued loans without the FHA backing.
Originally, there was a ban put in place to prevent flipping at inflated prices to unsuspecting buyers. And, certain conditions must be met in order to obtain a waiver in the current market. In order for the transaction to be complete, the waivers must include the buyer and seller being at “arms length” with no other relationship. Also, the selling price must be at 20% or more above the previous selling price. Lenders must document and justify the increase and meet all other conditions including inspections.
Since 2010 the FHA has insured more than 42,000 homes that were bought and resold within 90 days for more than 7 billion in mortgage principle.