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Good News For Investors! Good News for First Time Homebuyers!

By
Real Estate Agent with Realty World Select

As we know, there are several types of sales on the market:

-1. "Regular"

-2. Short Sales

-3. Bank owned (REO)

However, of the "regular" sales, quite a few are "flips", which means that an investor has purchased a bank owned home, or possibly a short sale and renovated it for resale. At times this renovation has been either mostly cosmetic eg new paint, carpet, updated kitchen appliances etc. Other times has been major renovations like mold remediation, new roof, major kitchen and bathroom renovations. 

Often, this renovation took less than 90 days to compete and the investor was anxious to get the house back on the market. The longer that a property is held on to, the more costs are involved, especially if there is a steep HOA or condo fee, utilities, tax etc. Besides that, a vacant home has the risk of potential vandalism. 

After renovation, these properties are then purchased by by buyers using either mortgage or cash- most likely mortgage. There are different types of mortgages depending on the situation of the purchaser. The most common, recently, for first time home buyers have been the FHA loan. However, there was a glitch! FHA would not insure a loan if the property was owned by the seller less than 90 days. 

The good news both for investors and first time home buyers is that FHA Commissioner, David H. Stevens announced on January 15th:

'"FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties," said FHA Commissioner David H. Stevens. "This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner.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.'

 

This is definitely good news for us all!

For the full article go to: http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-011

 

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