from Local Attorney, Michael H. Wasserman

Sunday, December 9, 2012

Re-Habber's REJOICE: FHA Extends "Anti-Flipping" Waiver

by: Michael Wasserman

Good news for anyone interested in buying & flipping single family homes. The FHA has extended it's "90 day anti-flipping" waiver for another two years. The extension leaves open some great money-making opportunities for individuals and enterprises interested in real estate transaction. It should also be a benefit to communities burdened by vacant/run down/abandoned housing stock. (Not bad for those of us who facilitate home purchases and sales either).  In this context, "flips"  are two-step real estate deals where a distressed home is purchased cheap, fixed-up quickly and then resold at a profit. The art of the deal involves finding the right homes at the right price, making the right repairs, and then reselling as quickly as possibly to minimize the "carrying costs" associated with owning the property. 


Historically, flipping can be a very profitable enterprise. Unfortunately, many such profiteers made their money by committing mortgage fraud. Unscrupulous sellers could (and did) inflate prices on homes by single or multiple sales & resales, typically having done little or no rehab work at all. Unsuspecting buyers paid higher prices and mortgage lenders made loans for amounts far in excess of actual (fair) property values. 

As Ken Harvey from Inman News summed up:
Those flips frequently involved collusion and fraud by teams of mortgage loan officers, realty agents and appraisers -- even straw buyers who defaulted and disappeared without making a single payment -- and racked up significant losses to FHA's insurance fund. Neighborhoods suffered because the properties remained empty and in bad physical condition, depressing values of houses in the immediate vicinity.