Today is the Day: HUD Suspends the 90-day Anti-Flipping Rule

Posted by Mary Ray on Monday, February 1st, 2010 at 8:20am.

Great news for investors. Beginning today, February 1st, HUD has decided to shelve the current FHA 90-day anti-flipping rule for a one year period. This single act should boost Cape Coral waterfront home sales and bring even more investors to the area.


Under the new rules, homes sold within the past 90 days may be resold with an FHA backed mortgage. There are some specific guidelines that should be understood. These serve to protect HUD from insuring overvalued properties while still allowing the true investor to pick up a property at a low price, make necessary renovations, and turn a justified profit.


The protective guidelines include three main points:


1. The transaction must hold no inappropriate interest or agreements between seller and purchaser. What determines an "appropriate" transaction? First, the seller must hold title to the property. Also, any corporation or LLC serving as the seller must be operating in accordance with state and Federal laws. The property should be free from prior flipping activity. This will be determined through chain of title information on the appraisal report. The property must also have been marketed openly and fairly through MLS, For Sale by Owner, etc.


2. The lender must meet specific requirements if the sale price of the property is 20 percent or more than the acquisition cost. These requirements do NOT mean that a home or property can't be sold for more than 20 percent, but they DO mean that the increase must be justified by improvements or property development.


Save your receipts for all renovation labor and materials, take plenty of before and after pictures, and be ready to provide a second property appraisal after the renovations are complete since the burden of proof for a price increase will ultimately rest with the seller.  For the seasoned Cape Coral real estate investor who knows how to spot a hot property in need of some work and make the necessary improvements, there should be no problem.


3. The new rules do not include the Home Equity Conversion Mortgage program.


The anti-flipping rule, originally put into place in 2003, was created to prevent illegal flipping. The problem with the rule was that it was so broad that it tied the hands of even HUD reselling its own foreclosed properties in 90 days with FHA financing. Lawful builders, remodelers,  and lenders with foreclosed properties for sale were all unfairly impacted by the 2003 rule.


HUD eventually started to make exceptions to the rule. So many in fact, that by 2009 virtually everyone had been released from the law, except for homes owned by regular citizens. Now that the rule has been suspended for 12 months, it will open the door once again to the private, individual investor. We are hoping that after one year has passed, HUD will decide that it was a smart move, and choose to lift the rule indefinitely.


If you are a private investor, looking to make a profit on Cape Coral real estate, the time is now. There are still numerous homes in need of renovations, that can be greatly improved and resold in a short amount of time. Call us here at Sporleder Ray Realty Group. We have the knowledge and experience to help you locate the properties that will prove to be the most valuable investment. Whether you are looking for inland property or Cape Coral waterfront homes, prices have never been better.

By David Sporleder | Sporleder-Ray Realty Group || Google+


1 Response to "Today is the Day: HUD Suspends the 90-day Anti-Flipping Rule"

Dale Bowen wrote: I am interested in acquiring a sail boat appropriate, direct gulf access home and I like pool homes, but that is not an absolute requirement. I am most interested in a moderate to major fixer upper property since I am a rehab specialist. I am also interested in acquiring other types of low value fixers.

Posted on Saturday, February 13th, 2010 at 8:54am.

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