I was over at www.ripoffreport.com and came across a discussion that stated that fipping was impossible, possibly illegal, due to how long an owner must have the property before a new owner could purchase with traditional mortgage company/bank financing (the way most retail home buyers tend to go). It also stated in part of the discussion that traditional lenders would only finance for 10% above the last purchasers cost if purchased in a short time period.
It’s too long to post here, but you can find the full discussion at http://www.ripoffreport.com/reports/ripoff79931.htm
Those of you doing fix and fips, have you had problems with your end retail buyer optaining financing?
Flipping is NOT illegal. However, it can allow for the introduction of fraud as seen in Asbury Park, NJ in the last few years. This happened because of unethical appraisers and investors actions as well as mortgage brokers, and a whole slew of others.
It is not in violation of the law for lenders to handle flip properties, but they may not do so due to their own guidelines. Many Lenders will gladly do Flips all day long as long as you can adequatly explain and document why the drastic increase in price has occurred. i.e. Rehab you bought for 20K now worth 80K. Why - New Roof, Foundation Repairs, Landscaping, Windows, Siding, Distressed Seller,Etc. If you evidence it to their satisfaction-not a problem usually. What they don’t want is a 20K purchase and lend 80K on it without an explanation (and appreciation doesn’t cut it).
The other issue you bring up is “seasoning” the title. Many Lenders will not cough up Home Equity Money until the title has been held for a certain period of time - 6 Months - 12 Months.
Hope that Helps
I just read the report - simply not true that no banks or credit unions will do this. With proper documentation it should not and most likely will not be a problem, But the Lenders will be dotting their I’s and crossing their T’s.
Had conversation with my mortgage broker less than 2 weeks ago on house i purchase 3/11/05 due to distressed seller. Told him wanted to flip it - Alert went up, Explained - Not a problem as long as it was documented and appraised for that by the lender’s appraiser. It was appraised, explained, and was never a problem. I did this in upstate NY by the way and am double closing Monday 3/28/05 with the buyer and seller. 17 Days no work needed on property purchased at approx 81% of appraisal value-sold at appraisal value.
But it does raise the old eyebrows. Especially in NJ!