Stearns Lending is now offering Arizona FHA Flips, effective today. This is an important tip for Arizona investors to know.
FHA Flips are allowed under the following circumstances:
- The transaction must be arms-length with no identity of interest between the buyer and the seller or other parties in the sales transaction.
- The seller must hold title to the property at the time of the purchase contract.
- LLCs, corporations or trusts that are serving as sellers must be established and operated in accordance with applicable state & Federal law.
- No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12 month time frame.
- The property must be marketed openly and fairly via MLS, auction, FSBO offering or developer marketing (any sales contracts that refer to an “assignment of contract of sale” which represents a special arrangement between seller and buyer may be a red flag).
- The sales price of the property must be less than 20% above the investor's purchase price. We are not accepting the additional HUD waiver conditions for increases of 20% or more at this time.
Obviously, this isn't a loan for somebody who wants to buy a foreclosure that is in complete and total disrepair, as you will not likely recoup all of your costs with a 20% profit.
However, if you are just looking to put a coat of paint on a foreclosure and immediately sell it. It can be done with this new loan program.
Considering that you have to consider costs to sell and market your home, this loan would be perfect to help market your Arizona flip if you were:
1. A handyman (or handylady for that matter)
2. A licensed, Arizona Realtor who also happens to be an investor... This way, you save all of the expense of listing and selling your home, which can cut into your 20% commission more deeply than fixing it up
Or, if you work with a Realtor on a regular basis and that Realtor tells you that they will work for a discounted commission, that would work nicely too.
But if you are paying 6% in real estate commissions to list and sell your home, and the home cost you 2% in closing costs when you purchased it, and you paid a handyman another 5% to fix it up-- suddenly the 20% profit allowed by the FHA gets eaten-up rather quickly.
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