Fannie Mae Foreclosures have an Anti-Flipping policy, Why?

It is a drag to every investor when they see the deed restriction on a Fannie Mae owned home. The investor who wants to buy a foreclosure and fix it up to sell it in a hurry has to stall on their plans because Fannie Mae adds deed restrictions. The following is some information you need to know before you consider flipping.

1. You may not resale the property at above 120% of the purchased price. This amount never covers the cost of improvements, commission, or other expenses. It only works if someone is willing to buy the property in the same As-Is condition the original investor purchased it.

2. You may not convey the property for 90 days. You can have it on the market and advertise it but you may not actually change title until the 91st day from the day you closed on it.

3. An FHA borrow can't open escrow on a home that is flipped until the 91st day. This is an FHA policy, not a Fannie Mae. However, it complicates the selling of a flipped piece of property.

Fannie Mae's logic about their Anti-Flipping policy is that they want to prevent someone from buying a Fannie Mae home and making minor cosmetic changes and selling it for an inflated price.

However, how possible is it today to sell something at an inflatted price? First of all, it is likely the person buying a flipped home is going to need a loan. I think the appraisers out there are smarter than Fannie Mae thinks. An appraiser does their homework and is out there to protect the Lender.

Investors in the flipping business are doing a world of good to a neighborhood. They find something needing work. Generally, what they buy can't be purchased with a loan due to the condition of the home. They will improve the electrical, mechanicals, and do much more than cosmetic improvements. They are bringing the home up to the neighborhood's highest and best condition. A buyer gets to enjoy a remodeled home and live in an area they can afford. I feel the same about the FHA requirement. We need these flippers because they are willing to invest and take the risks. They don't make money everytime they flip. Maybe we should be writing letters to the Lenders and Fannie Mae. I think these policies are not helping today's market.