Sunday, November 29, 2009

FHA and Fix 'n Flip Do Not Mix

This is a phrase you're seeing a lot lately in the MLS listings on entry-level housing in metro Phoenix:

This is a property acquired at trustee sale in the past 30 days and will not qualify for FHA due to the cure period requirements. Will qualify for VA or conventional.

Well, actually what you typically see is something a lot more cryptic, like "This is an acquired property" which kills me because, well... aren't they all? Digressions aside...

These homes are called Fix and Flips.* And my point is that the fact they are Fix and Flips usually goes in the private, Realtors-only Remarks data field. Consumers can't see that data field. And many buyers need to know, because FHA mortgage rules do not allow buyers to purchase homes that the seller has not owned for at least 90 days.

If you're using an FHA mortgage, there's no point looking at a house the owner just bought 25 days ago, because he can't sell it to you. By the time he can sell it to you, it will likely be gone, sold to someone else.

As a buyer, how do you know if you're looking at a fix and flip? Usually you can't tell.**

The Internet is chock-full of information but you still need a professional to help filter the good from the useless. Contact a Realtor, begin creating a relationship now, so that when you're ready to actually buy you've got someone you know and trust who's already on board with your purchase plans.

*Sadly, what I often end up calling these homes is "an essentially crappy house with a thick coat of fresh paint and some new light fixtures."

**The tax records are publicly available and sometimes a good clue to how long the seller has owned the home. But the tax records are anywhere from a couple of weeks to a couple of months behind the pace of home sales.