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Anti-Flipping Rule Good for Denver Investors???
Housing and Urban Development Removes 90 Day Seasoning Rule
Investors Rehab Home
Investors Rehab Home
This might not seem like a big deal to most home buyers in our average to higher end real estate market, but this will effect many first time home buyers in Denver. In the past, an investor had to wait 90 days to sell a fix and flip home to an FHA buyer. Since many of these investors need to turn their cash quickly, the homes sold to buyers with cash or conventional financing. That left many FHA buyers looking at homes that they could not buy due to the government restrictions. Those FHA buyers in Denver are now going to be on a level playing field with other buyers who have cash and conventional financing.
Will competition for lower priced homes increase?
The competition for homes in good condition under 200K is already pretty intense in and around Denver. Now that the restriction is lifted, many investors trying to scoop up these low priced homes and resell them quickly for a profit may increase. The asset managers that are responsible for liquidating the bank’s assets through REO agents tend to prefer CASH offers to financing. Be honest, if you were selling a home and had two competing offers and one was cash and the other had 3.5% down payment and a ton of inspections and appraisals not to mention buyer credit concerns and income verification you would take the cash offer. Unfortunately I believe that this rule will actually make it harder for first time home buyers in Denver to buy a lower priced home.
The Investors like the rule but the devil is in the details.
If it sounds too good to be true then you can bet that it is. There are restrictions put on these goodies but they aren’t much different than they were before. The following excerpt is directly from the HUD website.
The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:
* All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
* In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
* The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
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Hi Matt:
Great info and BLOG… You really know your area! What a great resource!
Thanks!
Jessica
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Matt,
Great info. By the way this new blog look excellent! I subscribed to your feeds so I’ll be looking for great posts in the future.
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