Monday, January 31, 2011

90 Day Flip Rule Takes a Vacation...

Recently the feds overturned the 90 day flip rule that requires sellers to "hold" onto a property for 90 days after the initial seller purchase regardless of whether they can sell the property in a shorter time period.

This move was pushed by the need to get the existing inventory of foreclosures reduced, therefore allowing potential investors to buy properties, do needed improvements and immediately put the property back on the market to sell. Over the past several years, this has not been possible, causing investors to hold back purchasing investment property because hanging onto the properties for 90+ days was just not financially reasonable.

Another consequence the 90 day rule was the impact of contractors losing work as a result of investors not needing projects on distressed properties. These jobs are part of the fuel for a healthy real estate economy.

There may be a glut of homes on the market but the majority need updates or minor repairs, something an investor can certainly handle with cash on hand. Unfortunately, the 90 day rule halted these small improvements in their tracks. Small projects can take less than a week and investors used to be able to get the home back on the market and sold quickly. Repairs and updates such as carpet, paint and minor cosmetics can help a property sell and keeps the buyers from having to come out of pocket with hard-to-get cash since down payment requirements are now larger and there are limitations on seller contributions. The ability for a seller to make these improvements on a recent purchase also helps to steady declining housing values.

All in all, the break will hopefully encourage investment, put contractors back on the job and remove the glut of foreclosures and distressed homes on the market.

Read the waiver from HUD
http://www.hud.gov/offices/hsg/sfh/currentwaiver.pdf

Want to get in on the action? Give me a call 336-817-3598 or shoot an email to me at brooke.cashion@allentate.com. There are some great opportunities out there and we look forward to assisting you in your real estate needs!

Brooke

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