We’ve got an encouraging update for all you property rehab specialists and buyers in general. FHA has once again decided not to enforce its 90-day rule giving flippers a welcome sigh of relief.
This property flipping mandate had called for sellers to be on the title for 90 or more days before a new buyer could write a contract for the purchase of a property with an FHA loan. Designed to assist in the sale of the excess inventory due to foreclosures, for investors restoring and selling properties this now means that the faster they can accomplish the rehab, the faster they can get the property on the market and avoid the carrying costs.
For buyers, this means a flood of newly renovated properties available for purchase. For the neighbors who are enduring the impact of overgrown and neglected homes in their area, they can look upon the investors as a property rescue squad of sorts. The collateral advantages are also passed along to other sellers. Improved properties impact the value of their comps and therefore beefs up their appraisal (and curb!) appeal.
Here at Vandyk we have no additional overlays beyond those required by FHA. Please note that FHA does require:
1. A second appraisal that is not to be paid by the buyer
2. If the profit exceeds 20% of the sale, an explanation is necessary as to what constituted such a large profit
I like the fact that FHA is encouraging investors to renovate the foreclosed and abandoned. This offers the multiple benefits of:
§ Creating the availability of affordable homes for first time home buyers
§ Helping to stabilize property prices
§ Contributing to the overall health and wellness of individual communities
So it’s a good day at the FHA. By the way, this waiver is extended through 12/31/2014 – it will be interesting to look back on these couple of years and see the influence this action had on the market as a whole. Stay tuned…