Flip away in 2012
Like a lot of government news this winter, changes made to help the economy are not actual changes. They are, instead, extensions of changes already made that were set to expire. One of those was an extension of the waiver on anti-flipping regulations. (found in right-hand column)
Before the waiver, buyers were unable to get FHA-insured funding to buy houses that they intended to sell within 90 days. The prohibition was designed to stop speculators during the ya-ya years, when house prices were rising in the bubble. It’s been extended a couple of times now.
The idea out of Washington is that it should be easy to buy a distressed property, improve it, and flip it. The hope is that this will help communities with large areas of distressed houses.
HUD writes:
FHA research finds that in today’s market, acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.
This year, I worked with distressed properties that closed in less than 90 days. From what I read from agents across the country, it does not seem like the norm. Distressed house sales still seem pretty slow, according to agent reports. Is your experience more in line with FHA’s research?
I was working with an investor in the autumn of 2009. He was stressed about the 90-day hold requirement and happy when the waiver came into practice in February 2010. It was subsequently extended until February 2011, then to December 2011, and now to December 2012. The waiver was a boon to his business.
From the Federal Register:
FHA, through the regulatory waiver, encourages investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes with the objective of increasing the availability of affordable homes for firsttime [sic] and other purchasers and helping to stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high.While the waiver is available for the purpose of stimulating rehabilitation of foreclosed and abandoned homes, the waiver is applicable to all single family properties being resold within the 90-day period after prior acquisition, and was not limited to foreclosed properties. Additionally, the waiver is subject to
certain conditions, and eligible mortgages must meet these conditions to take advantage of the waiver. The waiver is not applicable to mortgages insured under HUD’s Home Equity Conversion Mortgage (HECM) Program.
There are investors out there, flipping distressed property. Are you one of them? Would the end of this waiver affect your business plan?
Has the waiver done enough to help speed the sale of excess distressed houses?
