Infinite Luxury Just for You

I have had some people ask me about the rules relating to flipping property and through

a newsletter I recieve on a monthly basis I came across an article which listed what you

should do if you are considering flipping houses for investment purposes.  I hope this

answers some of your questions but if I were you I would suggess you do some

research as well on your own.

A.                  Transaction must be arms-length:

a.        Seller can be an LLC, Corporation or Trust as long as it was established  in              accordance with applicable state/federal law

 
i.        Multiple title transfers in the past 12 months require additional review and may require additional documentation and/or may not be eligible for FHA financing. (Deeding the property to or from an individual(s) and an LLC, corp or trust may be allowed if the owners of the LLC, corp or trust are the same as the individual(s) that deeded it)
b.        Property has to have been marketed openly and fairly.  
i.        Properties listed on MLS meet this requirement.

B.        If sales price is less than 20% or more over seller’s acquisition cost then:
a.        Normal appraisal underwriting policy applies

C.        If sales price is 20% or more over seller’s acquisition cost and:

a.        The increase in value is due to improvements/renovation:
i.        Appraiser to verify what renovation, repair or work was done to the property to substantiate the increase in value.  Dollar for dollar improvements are not required, however, the underwriter should review and analyze if the scope of work performed to the property would justify the increase in value; OR if appraiser cannot warrant that legitimate work was done to the property to substantiate the increase in value, a second appraisal supporting the value is required. (lower of the two will be used)
ii.        In addition to the above appraisal requirements, the broker/borrower must obtain a home inspection report prior to loan approval.  Until further guidance or a mortgagee letter is issued from FHA, additional requirements may apply.

b.        The increase in value is not due to any significant improvements/renovation:
i.        Appraiser to provide appropriate explanation of the increase in property value and provide sales comparables to support that value since the prior title transfer; OR if the appraiser cannot justify the increase in value, a second appraisal supporting value is required lower of the two will be used)

“Cherish your yesterdays, dream your tomorrows, but live your today’s. Tomorrow belongs to those who fully use today!”* – Unknown

The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.  .

It is amazing how the whole face of Real Estate has changed over the past 20 years first we had the Resolution Trust Company set up in the 1980’s for REO’s, which swept the nation for 10 years and is still with us today, now we have the National Short-Sales era upon us.  It is a always changing Market and contracts as well as rules and regs have changed so much we have an ever changing face of Real Estate as we know it.  Longer contracts more complicated contracts with more and more paper work which no one seams to want or most don’t know how to fill out correctly.  We as realtors must alway be vigilent and cross our T’s and dot our I’s for if we don’t then it will be us who pays the price not the Banks or Title Companies.The national short sale program surged 407% this quarter. According to the TARP Quarterly Report to Congress, the HAMP program resulted in only 166,000 permanent modifications from the 3.3 million homeowners who requested help.  With the focus now shifted toward short sales, real estate professionals are registering to assist in the nation-wide initiative to reach out to homeowners in need of short sale assistance. We as professionals need to be sure we are up to date on the process of short sales and the forms that go along with them there are not short cuts.