“Do Flippers Live by a Different Standard?”
I personally don’t understand some of the rules about houses that were purchased to be renovated and resold. Here is what doesn’t make sense to me. If the home has been renovated, has a deposit from a qualified buyer, had a home inspection and an appraisal or in some cases two appraisals, then what difference does it make how much profit the house flipper makes or in how many days?
I am doing a mortgage for a client, buying a home that is being flipped. The lender has asked for a list of all the renovations that was done, how much was spent for these renovations and how much profit is being made. We asked the underwriter, why this was being asked for and were told, “we just want to know”. Also, that if we don’t get the information, we’ll deny the loan. OK, deny the loan based on what guidelines?
The two Realtors, the seller and buyer have every right to be upset. We moved the loan to a different lender, already have an approval, but have been delayed by almost 3 weeks. We filed a complaint against the underwriter, but I’m not convinced it will make any difference. Some of the regulations and restrictions have gotten totally out of hand.
By: Bliss Sawyer
I've been hearing an ad on the radio that has me concerned: "Zero down. Buy a home and make $5,000-$15,000 in 30 days. Get in, get out, get rich."
You would have thought we learned a lesson over the past year, so I am assuming this is a get rich quick scheme that will leave people with less money and no house.
We definitely are seeing values increase in our area pretty quickly and this type of advertising is very bad for our industry. The ad also states they can do this without the help of a Realtor. Another scary thing.
Because of this, we took the opportunity this morning at a Realtor sales meeting to cook a pancake breakfast and do a little training on flipping rules. I picked up pancake mix and spatulas at the dollar store to go with our handout.
This was a great hit with all the agents and the broker. No Realtor wants to start a deal and have it not close because of loan rules they or their buyers did not know about.
Here is the content of our flyer. We realized after the fact that we did not mention that properties owned by federally chartered institutions (FHA, Fannie Mae, Freddie Mac, banks, credit unions) are exempt so I sent an email out after with this info.
Flipping Rules
Under 90 Days No financing available for FHA, FNMA, FHLMC.
Except under Temporary guidelines, financing may be available as long as the home does not increase over 20% of acquisition cost. 2nd appraisals may be required. It is possible to go over 20% per: underwriter discretions. (This is a rare occurrence)
91 days to 180 days Financing available for FHA FNMA, FHLMC.
Things to watch out for:
Sales price is increased by over 20%. “2nd appraisal may be required ” Underwriters Discretion on strength of appraisal.
180 days to 360 days financing available for FHA, FNMA, FHLMC.
Underwriters Discretion on strength of appraisal.
image: freedigitalphotos.net
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