Hello Silicon Valley Real Estate Investors,
If you are in the game of buying and reselling a short sale home for a profit, also known as "flipping a house", I am asking the question: Do you know how to play the game?
Before I elaborate any further, you should be aware that it is not illegal to buy and flip a short sale property as long as you disclose in the purchase contract that you intend to flip it.
Don’t get me wrong either: I do not claim, in this blog, to give you the list of all the rules you need to know for flipping a home but merely share a few tips from the point of view of a Realtor advising many real estate investors in Silicon Valley.
As far as I am aware, the key guidelines regarding "house flipping" today are as follows:
1. Anti-Flipping Disclosures
Nowadays, addenda to the contract such as Anti Flip Affidavits and Arms' Length Transaction disclosures must systematically be signed by the buyer of a short sale property.
All of these documents state that you, as the buyer who intends to flip a property, will not be allowed by the lender(s) to resell the property for a given period of time, usually anywhere from 30 to 90 days.
Read these disclosures with the utmost attention! The documents outline very precisely under which conditions you will be authorized to resell the property for a profit. Also, remember that these documents are binding as they are part of the purchase contract and that you may be prosecuted if you do fail to comply.
2. Fannie Mae & Freddie Mac Title Transfer Requirements
Since January 18, 2013, the following guidelines apply to all Fannie Mae and Freddie Mac short sales with or without an offer:
- The buyer is prohibited from selling the property for any sales price for a period of 30 days from the date of the deed;
- After a 30 day period, and until 90 days from the date of the deed, the buyer is further prohibited from selling the property for a sales price greater than 120% of the short sale price.
3. HUD moratorium on FHA 90-days Anti-Flipping Rules
In November 2012, the Federal Housing Authority (FHA) announced that they would maintain and extend until 31 December 2014 their moratorium regarding their “90-Day Anti Flipping” rule for all FHA insured loans.
This means that all eligible buyers may use FHA-insured financing to purchase properties they intend to flip.
Asking the right questions at the right time is key
in getting a good deal, closing escrow in a timely manner with as
little stress as possible for all the parties involved. Enjoy the hunt and happy house flipping!
© Sophia Delacotte CDPE, SFR, CHS
San Jose Realtor
Cell: (408) 717-2575