2015 Rules Buyers and Sellers Must Know About Financing Flipped Properties
Buying and selling flipped properties can be challenging in this market depending on the financing the buyer is trying to get. For example, many people don’t know that conventional financing or VA does NOT have an anti flip policy, but many lenders still apply their own rules, and that all FHA buyers now have to wait >90 days to purchase a home that was fixed and flipped by a seller. Understanding the different financing rules that are in place today for buyers and sellers and flipped properties is essential for success in today’s marketplace.
Conventional Guidelines for Financing Flipped Properties
Flipping is a term used by investors, when they buy low, renovate the property and quickly resell it for a profit. An investors goal is to flip a property as quickly as possible. The 90 day flipping restriction by FHA might have some impact on some investors. However, it might be very minimal as many of these flips are cash purchases. Many investors, purchase properties all cash because it gives them the credibility and potential to close quickly during a seller's market. Another reason, is that they want to get into a property and out as soon as possible. The longer their funds are tied up on a property, the less they profit on their investment. This waiver was first initiated January 2010 and it is due to expire on Dec of 2014.
For those who utilize FHA financing, the 90 day restriction will begin on the 1st of the year. All executed contract before 11:59pm on Dec 31, 2014 will still be waived. After, the first of the year, there will be some exceptions:
- Hud properties under REO
- Sales by other federal agencies of REO properties
- Sales of properties by non profit organizations approved for resale by HUD
- Sales by state or federal financial institutions such as Fannie, Freddie or GSE
- Sales of Hud properties where the President declares it a federal disaster area.