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FHA suspends anti-flipping rules

Reblogger Sharon Alters

Real Estate Agent with Coldwell Banker Vanguard Realty - 904-673-2308

February 01, 2010 02:17 AM

This is a practical, no cost move that will help sell some of the excess inventory in the Jacksonville FL real estate market. It may be a boost for some Fleming Island FL homes for sale as well.

To boost the residential foreclosure segment of the housing market, FHA has suspended its anti-flipping rules beginning today, Feb. 1. The move will help lower-income and first-time buyers as well as real estate investors while encouraging activity in communities especially hard hit by the housing slow down.

The FHA 90-day flipping rule was a response to fraudulent quick flips that would artificially over-inflate the value of a foreclosure property. The change will mean the difference between a 10 percent down payment on a conventional mortgage and a 3.5 percent down payment on an FHA insured loan which can make all the difference for many buyers on the lower end of the market spectrum.

The rule suspension is temporary for one year and will still leave some anit-fraud restrictions in place. Specifically, conflicts of interest will still be banned, and price jumps exceeding 20 percent will require extensive documentation of renovation expenditures justifying the increase.

For more news and information about the real estate foreclosure market, please visit www.USHud.com.

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Charita Cadenhead

eXp Realty - Birmingham, AL

Serving Jefferson and Shelby Counties (Alabama)

Sharon there are so many self-defeating rules that it just doesn't make sense. For example the 20% rule. It doesn't appear to me that rehab, holding cost and resale commissions have been factored into this 20%. I recently faced this issue where an investor bought a house at a great price, rehabbed it, listed it (not my listing) and my buyer got it at $10k under list price.

Well because the resale price was well over the 20% window, we had to get another appraisal to confirm the 1st appraised value (which both came in at he same value). Not once did the lender ask for documentation of what had been done to the property and at what cost. In which case scrutiny of the 20% over the price that the investor paid did not make sense.

It also seems self-defeating in that the whole idea of rehabbing is to bring the home's value back up to at least it's FMV in it's days of glory.

Feb 02, 2010 11:37 AM

Sharon Alters

Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL

Realtor - Homes for Sale Fleming Island FL

Charita, you are right. Selling a house costs 8% alone in Florida including closing costs and sales commissions. That only leaves 12% for profit AND rehab. I thought the point was documenting if it were over 20% - why not ask for that before doing another appraisal?

Feb 02, 2010 12:40 PM

Exactly. At the time, it seemed to me that they were more concerned about how much money the investor would make as opposed to the real value of the house. As for the appraisals, they were both playing it safe and their opinions of value reflected that safety net.

Feb 02, 2010 08:59 PM

FHA suspends anti-flipping rules

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