Investors have been a large part of the housing recovery over the last year in the Phoenix real estate market. Investors have dominated the market for foreclosure properties coming on the market under $100,000 during the last year. Investors are buying the distressed properties, putting some money into fixing up the exterior which keeps the values up in the neighborhood and making the interior of the homes liveable.
One problem the investors have been facing is putting these homes back on the market and selling them quickly. Many home buyers who are looking for move-in ready homes under $120,000 are first-time home buyers who are purchasing the homes with an FHA loan. FHA has an anti-flipping rule which does now allow you to purchase a home with an FHA loan if the house has been purchased by the investor in the last 90 days. This is causing many turn-key homes to sit on the market longer than they should need to.
Friday HUD lifted the FHA 90-day ban for a one year period:
HUD Secretary Shaun Donovan said – “As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers. FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”
- The home purchase must be an arms-length transaction meaning you cannot have your father, daughter, husband or immediate relative purchase the home from you if you are the investor.
- If the property is sold for 20% more than what the investor purchased the home for a waiver must be obtained which include a 2nd appraisal and a property inspection report. The appraiser must provide appropriate explanation of the increase in property value since the home was purchased.
- Property must be inspected by a licensed inspector and the inspection report must be provided to the lender.
So if an investor was going to purchase a house for $70,000, put $10,000 into the property which is very reasonable, they are going to need to hope the two appraisers will justify the house being sold for anything under $84,000.More information can be found here.
