There are great investment opportunities in the marketplace right now with the abundance of distressed sales! Many of our clients are actually profiting by "flipping" after we have negotiated a property that is in the foreclosure process, bank-owned or a short sale.
Financing for flipped properties is available with a few restrictions. First let's define a flipped property. If a seller acquired title less than 6 months ago and is selling for a profit, the buyer's loan would fall under the flip guidelines. FHA has a separate rule requiring the owner/seller to be on title for 91 days prior to entering a contract to sell the home.
Guidelines for conventional (both traditional conforming, jumbo conforming, and non-conforming) allow financing for flipped homes on a case by case basis. Financing for flips requires an exception, but we have found the exceptions are frequently granted when the hot buttons below are followed:
- Seller needs to be the same person or entity who recently acquired title
- Subject property must be sold on the open market through a public listing service (MLS) to substantiate market price
- Full documentation is required from the buyer (standard in today's market)
- Appraiser to provide details around improvements made to the property
- Down payment must be fully documented
- Primary or secondary occupancy only (may consider investor purchase with substantial down payment)
The hot button on financing for flipped properties is the seller's investment into the home. Investors do not like when someone simply buys a property on the auction steps and immediately sells it with no improvements to the home. Examples of acceptable improvements could include replacing carpet/flooring, painting, cleaning, roof repairs, etc. They simply ask for paid invoices to document some improvement to the home
If you are in the market for an awesome deal, we will be happy to send a list of the best deals in town!