Post by Brian Gibbons on Mar 21, 2005 16:57:40 GMT -5
Real Answers to Theoretical Legal Questions
Dear Auburn,
I’ve heard that HUD will no longer allow us to “flip” houses? Is my new flip a flop?
Quick Turn Artist
<br>Dear Quick Turn, <br>New investors really have a hard time making Heads or Tails with this new law.
Rest assured, there is absolutely no prohibition on quick-turning houses.
What has happened is as a matter of public policy HUD has decided to make the activity more difficult on us investors, in an effort to stop predatory real estate practices.
Although this happened a year ago, dealing with the consequences is still one of my most frequently asked questions.
<br>The HUD rule,"FR-4615 Prohibition of Property Flipping in HUD's Single Family Mortgage Insurance Programs," makes recently flipped properties ineligible for FHA mortgage insurance, thus preventing any FHA loan on the property.
It also allows FHA to better manage its insurance risk by requiring additional support for a property's value when a significant increase between sales occurs.
There are a few other interesting elements of this law.
Sale By Owner of Record <br>Only the owner of record may sell a home to an individual who will obtain FHA mortgage insurance for the loan; it may not involve any sale or assignment of the sales contract, a procedure often observed when the homebuyer is determined to have been a victim of predatory practices.
The solution?
If you have been bird-dogging by flipping sales contracts, you should switch to option contracts.
Time Restrictions on Resales Less than 90 Days
Re-sales occurring 90 days or less following acquisition will not be eligible for a mortgage to be insured by FHA. FHA's analysis disclosed that among the most egregious examples of predatory lending was on "flips" that occurred within a very brief time span, often within days.
Thus, the "quick flips" will be eliminated.
The solution?
Find a lineup of non-FHA lenders with a mortgage broker you trust.
Or, hold properties for 90 days or more.
Resales occurring between 91 and 180 Days
These sales will be eligible for FHA insurance provided that the lender obtains an additional appraisal from an independent appraiser based on a re-sale percentage threshold established by FHA. Lenders will want to prove that the increased value is the result of rehabilitation of the property.
<br>For more information and details on this new law, see:
tinyurl.com/2ht32
The Care and Creation of Your Corporate Castle
Want to know the proper entity structure for your real estate business? Finally, the answer is clear. <br>
You need a PREMES, my trademarked system for the best asset protection and tax savings for real estate investors. <br>
Whether you're a quick turn artist or a buy-and-hold landlord, this is the answer for you.
The course comes with the complete How-to Incorporate in your state, together with all the forms and documents you need, all for less that two hours of my billing time!
For more information, see
www.byspecialarrangements.com/corporate-castle.htm
Join Us in the Windy City
Friends at the WCRT are really putting it together!
If you attended REIU in Vegas, you don't want to miss this event. If you didn't attend REIU-- this is the one place where you can learn from the people down in the dirt at a no-sales seminar.
Check out the developments at www.reiunion.com
Have You Seen Our New Site?? <br>Our new site is coming along nicely, see the progress at www.byspecialarrangements.com
Brought to you by www.creiu.com
Dear Auburn,
I’ve heard that HUD will no longer allow us to “flip” houses? Is my new flip a flop?
Quick Turn Artist
<br>Dear Quick Turn, <br>New investors really have a hard time making Heads or Tails with this new law.
Rest assured, there is absolutely no prohibition on quick-turning houses.
What has happened is as a matter of public policy HUD has decided to make the activity more difficult on us investors, in an effort to stop predatory real estate practices.
Although this happened a year ago, dealing with the consequences is still one of my most frequently asked questions.
<br>The HUD rule,"FR-4615 Prohibition of Property Flipping in HUD's Single Family Mortgage Insurance Programs," makes recently flipped properties ineligible for FHA mortgage insurance, thus preventing any FHA loan on the property.
It also allows FHA to better manage its insurance risk by requiring additional support for a property's value when a significant increase between sales occurs.
There are a few other interesting elements of this law.
Sale By Owner of Record <br>Only the owner of record may sell a home to an individual who will obtain FHA mortgage insurance for the loan; it may not involve any sale or assignment of the sales contract, a procedure often observed when the homebuyer is determined to have been a victim of predatory practices.
The solution?
If you have been bird-dogging by flipping sales contracts, you should switch to option contracts.
Time Restrictions on Resales Less than 90 Days
Re-sales occurring 90 days or less following acquisition will not be eligible for a mortgage to be insured by FHA. FHA's analysis disclosed that among the most egregious examples of predatory lending was on "flips" that occurred within a very brief time span, often within days.
Thus, the "quick flips" will be eliminated.
The solution?
Find a lineup of non-FHA lenders with a mortgage broker you trust.
Or, hold properties for 90 days or more.
Resales occurring between 91 and 180 Days
These sales will be eligible for FHA insurance provided that the lender obtains an additional appraisal from an independent appraiser based on a re-sale percentage threshold established by FHA. Lenders will want to prove that the increased value is the result of rehabilitation of the property.
<br>For more information and details on this new law, see:
tinyurl.com/2ht32
The Care and Creation of Your Corporate Castle
Want to know the proper entity structure for your real estate business? Finally, the answer is clear. <br>
You need a PREMES, my trademarked system for the best asset protection and tax savings for real estate investors. <br>
Whether you're a quick turn artist or a buy-and-hold landlord, this is the answer for you.
The course comes with the complete How-to Incorporate in your state, together with all the forms and documents you need, all for less that two hours of my billing time!
For more information, see
www.byspecialarrangements.com/corporate-castle.htm
Join Us in the Windy City
Friends at the WCRT are really putting it together!
If you attended REIU in Vegas, you don't want to miss this event. If you didn't attend REIU-- this is the one place where you can learn from the people down in the dirt at a no-sales seminar.
Check out the developments at www.reiunion.com
Have You Seen Our New Site?? <br>Our new site is coming along nicely, see the progress at www.byspecialarrangements.com
Brought to you by www.creiu.com