Wednesday, December 5, 2012

FHA "Flip Rule" Extension Benefits Fountain Hills Investors and Home Buyers

House-flipping became a dirty word during the downturn of the housing market, but the practice is back in vogue. It also has the conditional blessing of the Federal Housing Authority. This is good news for property investors and home buyers in Fountain Hills. Here's why!

Arizona property investors have been an essential part of our housing recovery. They absorb foreclosures, repair distressed homes and either return them to the market, or rent them out. As attractive as buying a foreclosed home on the cheap may sound, most home buyers are not financially equipped to deal with a home that needs extensive repairs.

Recognizing the important role investors play in the housing market, the FHA has extended its blessing of "house flipping" by allowing buyers to finance homes that have been owned by the seller for 90 days or less. Inman News has an excellent article on the subject, and I'm going to touch on the main points.

1. The home purchase must be an "arm's length" transaction, meaning the buyer and seller cannot be working together, or be in cahoots in any way. The seller must also provide good chain of title proving their ownership.

2. If the home sale price is 20% more than what the seller originally paid for it, the seller must show documented proof of repairs, or provide other detailed, viable explanations to justify the markup. The FHA may require a second appraisal to validate the price.

3. If a 20% markup is involved, a home inspection is mandatory, and the buyer will be provided a copy of the report. Any significant defects would require full repair before an FHA-backed mortgage would be approved.

These sensible guidelines protect home buyers, and empower them to purchase "flipped" homes with FHA mortgages. In turn, property investors have a wider market of qualified home buyers.

If you are a first-time home buyer, you won't recognize a "flipped" home from any other on the market. As your Accredited Buyer Representative, I can verify the last sale date of the home and confirm whether or not you may be looking at a flip. There's no need to avoid them, but you will want to be aware of this type of seller and do your homework. I will help you!

Let me be your guide to the Fountain Hills real estate market! I have helped Arizona home buyers and sellers for over 30 years, and I'd like to help you too! I will provide you with expert, professional representation throughout the home buying process. This saves you time and money, and protects you from potential headaches. 

Contact me today and find out more about home buying in Fountain Hills!

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