HUD WAIVES 90 DAY FLIP RULE – GREAT IT IS A POORLY DESIGNED RULE!

 HUD WAIVES 90 DAY FLIP RULE – GREAT IT IS A POORLY DESIGNED RULE!

Thank you, someone is listening. This rule would have helped more in the crazy run up days. But now that we are at or near of past the bottom of the real estate market, depending on your neighborhood here in Metro Phoenix real estate market, when investors buy homes and fix them up there should not be a 90 day rule. What the 90 day rule did was make the homes that banks were selling worth less money. You see if I am an investor. I want to buy that trashed bank owned home, fix it up, flip it and be profitable there are set expenses that determine what I will pay. I will pay the fixed up value less repair costs, selling expenses, reasonable return on my investment and -here are the 2 key expenses now being removed- Holding Costs plus holding risks. Many times a good flipper can be ready to go and have a crew remodel a home in 10 to 20 days max. They want the home fully remodeled before offering it for sale, because they get a higher price. Then the buyer can close escrow 30 days later. When they have to wait 91 days to close- more because the contract has to be 91 days then appraisals and approval, so you are really talking 110-120 days – your holding costs double and there is huge risk of vandalism.

Let’s do a mock example. Fixed up value $180,000. Repair costs $20,000. closing costs $13,000. Buyer’s expenses paid by seller $5,000. Profit $30,000. Holding costs $2,000. Then an investor buyer would be willing to pay $110,000 for this home and flip it quickly. But with the 90 day rule an investor might get funding elsewhere and increase the holding costs from a minimum to $6,000 to a possible $10,000. Then the risk for vandalism, this is difficult, but $10,000 is reasonable. Now they are willing to pay from $90,000 to 94,000.

Let’s just say the banks sell homes for 15% less and they sell $50 Billion worth of bank owned homes, without the 90 day rule they could reap closer to $7.5 Billion more in proceeds due to removing those investor expenses.

Did that make sense? Was this helpful for you? Please comment on this blog! I love criticism and praise!…Jeff Cameron

 

BREAKING NEWS!!!!!

FHA WAIVES 90 DAY FLIP RULE

HUD TAKES ACTION TO SPEED RESALE OF FORECLOSED PROPERTIES TO NEW OWNERS

Measure to help bring stability to home values and accelerate sale of vacant properties

 In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties.  The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes…

 …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.

 

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website at: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf