Why Is FHA Against Flipping?
I was talking with a banker today and was notified that in Springfield & Nixa, MO if you purchase a home, fix it up, and plan to sell it in under 6 months that you will not be able to sell it to a buyer with an FHA loan and make a profit, that the original purchase price plus fix up costs is all you can sell the property for regardless of the appraisal value. Is this true? I appreciate any information anyone has on this. This was supposedly just passed this year.[ Edited by momforgod on Date 07/22/2003 ]
Hi,
yeah it was recently passed, but it's more in-depth then just 6 months. if i understand it correctly fha will ask for 2 appraisals in order to insure the loan as well as other requirements, but it is doable. a friend of mine bought in Jan and sold in July, next thursday actually, he owned it for 7 months.
Michael
There are lenders that do not require seasoning. You will have to do some research for your area and may need to try to steer your buyers to these companies.
If you lost a few Billion dollars due to flipping would you be for it?
This is what they are trying to stop Mortgage Scams
As legit investors we have to pay the price for this.
Interesting...does anyone know if the "6 month" flip law applies in Michigan?
The FHA ruling applies to the entire United States. It is a federal ruling.
Roger
I believe you will find the following link helpful in understanding why the new law went into effect concerning "Illegal Flipping".
This is just one case of what is going on with the 'scam artists' in our great industry that causes us all problems.
http://www.enquirer.com/editions/2003/07/23/loc_flipping.html
John $Cash$ Locke
PS: Make sure you check out the Info Graphic in the article.[ Edited by JohnLocke on Date 07/23/2003 ]
If they could just use another word to describe the fraudulent activity. The word "flipping" conjures up so many false ideas for people.
Buying low and selling high is the American way. I think that the HUD ruling has gone a lilttle too far personally. I could have almost gone along with a 90 day period, but 6 months hurts us all. I am fortunate (for right now) that my town is a heavy VA market and we also have some really good 97% conventional programs as well.
I would be careful with the use of the word "steer" when talking about which lenders to use.
It is my practice to ask the buyer if they need some mortgage sources and when they say yes...I always provide three good ones that will look out for the buyer's interests while getting the loan done at the same time.
Remember, this is a Federal Ruling and really has nothing to do with the lender. It is currently in effect on all new FHA loans, so your buyers will need VA or conventional financing in these cases.
I'm afraid that if we dont get some representation in high places, this problem will only become more severe in the coming years.
happy investing!
chris
Quote:I'm afraid that if we dont get some representation in high places, this problem will only become more severe in the coming years. Chris,
It is not a matter of representation in high places, it is a matter of participating in the process.
The final ruling is a lot less restrictive than the original proposed ruling.
In the original proposal, HUD wanted a six month title seasoning requirement with more documentation up to one year, whereas the final ruling only requires 90 days title seasoning. After 90 days and up to one year of title seasoning there are some additional documentation requirements to justify the sales price, but an FHA loan is still doable in that timeframe.
HUD invited public comment on the original proposed ruling up through November 5 of last year. I submitted my comments as well as several other investors, and HUD did incorporate many worthwhile public comments into the final ruling.