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FHA relaxes the “FLIPPING” rules

First of all, what is “flipping“; this is when a buyer purchases a home and then almost immediately places the home on the market for sale at a profit.  This kind of activity is usually accomplished by investors who typically purchase a property in need of repair or improvements, then they complete the repairs / improvements and sell the home at a profit.

The Federal Housing Administration in the past has frowned upon this type of activity; that is to say flipping, due to the tendency to have prices over inflated. During the real estate boom many people conducted flips in a not so legitimate format.  However, most investors are very legitimate and are simply looking to make a living by doing what they do best – improving properties. A good flip deal usually benefits everyone: the investors buys a property under market and makes a profit at the sale, the end-user buyer will buy an improved property that more than likely they would not have been able to improve themselves.

Now the FHA as of February 1st has loosened rules on flipping. The FHA will begin to offer financing on some properties in which the sellers has owned the property for less than 90 days. These less strict anit-fligging rules are being made in an effort to speed up sales in communities in which the rate of bank owned or foreclosure properties is too high.

This is most certainly going to be a positive effect on the market.  hopefully the new rules will allow for a faster absorption of inventory.

South Florida Brokers & Associates, Inc.