Just when you thought there was no hope for mortgage lending or the government doing anything tangible to help the housing market and real estate investing companies we finally pull an ace.
The FHA has renewed a waiver of the 90 day rule. This means investors can continue flipping houses to buyers using FHA loans without having to wait 90 days. With the extinction of to many lenders and loan programs in the last few years FHA loans have been about the only viable mortgage product for most first time home buyers and for real estate investing companies wanting to retail their homes for top dollar. Having to wait 3 months to sell means more holding costs and high interest payments on any money borrowed for acquisitions and repairs. Now the FHA is finally on board and realizing that investors and funding the flipping houses is essential for recovery.
However, there is a catch. For properties which are being sold for more than 20% of the previous sales price the new value may have to be justified by documented improvements. In other words you can’t just pick up a property for $100 at an auction and sell it for $150,000 tomorrow without showing you have done something to spruce it up. Just scratching out a list on the back of a napkin and scanning it to the underwriter isn’t going to cut it either. You need to be able to show an acceptable paper trail to back up what you paid for repairs and upgrades. This should also be given to the appraiser at or before inspection for them to verify and include in their report.
So get out there. Flip, rehab and win. Just don’t for get to document everything thoroughly.