FHA Flipping Issues
Apr 1st, 2010 by Vinny
In Phoenix we have a Fix and Flip subgroup that meets the last Wednesday of every month. This is part of the AZREIA organization that I belong to, which is an amazing investor group that you have to be a part of. Send me a comment through the blog and I will give you more information on it.
We met last night and discussed some of the issues that are affecting our industry. HUD is constantly at war with us it appears, and it is a little give, then get. Apparently last Friday they removed the ability to get two appraisals to skip over the 20% profit rule. For those not familiar with this, you are able to make over 20% profit on a home (this is the purchase price to the sales price) if you
- Can provide all the receipts for the repairs (actual invoices not fake stuff) or
- You can have two separate FHA appraisals if they both come in OK for value
The lastest we have heard from our mortgage officer is the receipts no longer count towards this. Even if you provide receipts, you cannot make more than 20% on the home. This does not include the re-habs costs any longer and the two appraisals do not skip over that rule.
Basically this now means we have to go back to the 90 day rule, they have lifted the ban but in effect have removed the ability for the fix/flip community to do any fixing in any short amount of time. There are few cases where you can purchase a home and sell it for less than 20% without re-hab.Those of us who use hard money loans (private financing) to finance the deals must now count on either a four to six month sales cycle, or find some other type of loan product such as conventional financing or VA.
Please tell me if this isn’t the case or lets figure out a way around it..
-Vince
