If you are in the game of buying and
reselling a short sale home for a profit, also known as "flipping a
house", I am asking the question: Do you know how to play the game?
Before I elaborate any further, you
should be aware that it is not illegal to buy and flip a short sale
property as long as you disclose in the purchase contract that you
intend to flip it.
Donâ€™t get me wrong either: I do not
claim, in this blog, to give you the list of all the rules you need to
know for flipping a home but merely share a few tips from the point ofÂ
view of a Realtor advising many real estate investors in Silicon Valley.
1. Anti-Flipping Disclosures
As far as I am aware, the key guidelines regarding "house flipping" today are as follows:
Nowadays, addenda to the contract such
as Anti Flip Affidavits and Arms' Length Transaction disclosures must
systematically be signed by the buyer of a short sale property.
All of these documents state that you, as the buyer who intends to flip a
property, will not be allowed by the lender(s) to resell the property
for a given period of time, usually anywhere from 30 to 90 days.
Read these disclosures with the utmost attention! The documents outline
very precisely under which conditions you will be authorized to resell
the property for a profit. Also, remember that these documents are
binding as they are part of the purchase contract and that you may be
prosecuted if you do fail to comply.
2. Fannie Mae & Freddie Mac Title Transfer Requirements
Since January 18, 2013, the following guidelines apply to all Fannie Mae and Freddie Mac short sales with or without an offer:
3. HUD moratorium on FHA 90-days Anti-Flipping Rules
- The buyer is prohibited from selling the property for any sales price for a period of 30 days from the date of the deed;
- After a 30 day period, and until 90 days from the date of the
deed, the buyer is further prohibited from selling the property for a
sales price greater than 120% of the short sale price.
In November 2012, the Federal Housing
Authority (FHA) announced that they would maintain and extend until 31
December 2014 their moratorium regarding their â€œ90-Day Anti Flippingâ€
rule for all FHA insured loans.
This means that all eligible buyers may use FHA-insured financing to purchase properties they intend to flip.
Asking the right questions at the right time is key
in getting a good deal, closing escrow in a timely manner with as
little stress as possible for all the parties involved. Enjoy the hunt and happy house flipping!