Responsible Flipping Gets HUD Okay
Owners who intend to live in their homes may be the focus of many current Federal programs, but the investor who buys a home to rent or renovate before renting is an important part of the housing picture these days. Investors plan on making a profit– never a dirty word in America! Until now, would-be buyers could not obtain FHA financing on a home owned for less than 90 days. Investors, who can often renovate and resell the home within three months, offer a stock of homes which often appealed to first time buyers who were then unable to find financing.
A new policy announced by HUD Secretary Shaun Donavan lifts the restrictions for buyers who are likely to buy HUD-owner properties, bank-owned properties, or homes purchased directly from sellers with an eye to “flipping” them—rehabbing them and putting them back on the market. The move, effective for one year starting February 1, 2010, was approved to aid the current foreclosure crisis.
The theory is that the move will get homes in the hands of owner-occupants more quickly, which will in turn, aid neighborhood stabilization. Not only are empty homes often an eyesore, but they pose safety hazards and are an invitation to vandals to drop by and strip them of wiring, plumbing, and appliances. The new law allows “flippers” to fix the homes and take their money and run, after selling the home to someone unlikely to qualify for traditional financing.
Given that the current housing stock is increased daily with bank-owned homes and other distressed properties, this gets the properties in salable condition more quickly. Many buyers who are attracted by the lower prices attached to distressed properties are often unable or unwilling to do the renovations need to make the house livable. Once the home is fixed up a bit, buyers are more interested taking the plunge.
The new program has some restrictions intended to prevent abuse:
- No sales to little Timmy or to Uncle Bob—sales must be arm’s-length.
- Lenders must meet certain criteria if the home is being sold for more than 20% of the seller’s acquisition cost.
- Only works with forward mortgages.
- Doesn’t apply to Home Equity Conversion Mortgages (HECM).
In the past, “flipping” acquired a bad name, as investors would resell homes at inflated prices to unsuspecting buyers. When the homes, often barely renovated, were then financed with high interest loans, buyers were left with worthless properties and high mortgages.
For more, information, read the full text of the new policy at the HUD website, then give Express Realty Services a call if you are interested in buying or selling. express Realty Services guarantees to sell your home in under 60 days, or we will buy it.
Tags: express realty dc, flipping a house, remodeled homes, renovated homes