Triangle Real Estate News

Attention Real Estate Flippers!

This is great info from our lender Julie Straub. She wanted to clarify some information regarding flipping of property. Julie found out that although FHA and FNMA/FHLMC may have their guidelines individual investors (Wells Fargo, Chase, BB&T, Bank of America, Suntrust etc) each add their own requirements.

FHA prohibits insuring a mortgage on a home owned by the seller for less than 90 days however in February FHA removed this requirement to help speed the resale of foreclosed properties to new owners in an effort to stabilize home values- This is a temporary policy change and started February 1 2010 with an effective date of 1 year unless otherwise extended or withdrawn.

FHA added the following guidelines to protect borrowers against predatory practices of flipping where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those meeting the following:

1) All transactions must be arms-length with no identity of interest between buyer and seller of any other parties participating in the transaction

2) In cases in which the sale price of the property is 20% or more above the sellers acquisition cost a 2^nd appraisal will be required and cannot be charged to the buyer. We will need to document the improvements to justify the increase in price

FNMA guidelines (Conventional loans)- FNMA does not have in writing as specific guidelines as does FHA. In speaking with most of the investors they are following the 90 day guideline that they wont insure the lender if it is a property is sold and has been owned by the current seller by less than 90 days.