Rosemary Brooks -Mother & Daughter (866)-750-8282

For those that out looking to purchase a home that was recently purchased and is now being resold -- this is called a flip.  There are rules that are associated with this type of resale if the buyer is a FHA buyer.  The investor or flipper cannot sell the property to buyer if it is less than 90 days of the last sale date of the property.   For buyers this is frustrating to see a property they like and find out it is cannot be sold to them because they are FHA approved-- especially when the property is in good condition and will pass FHA financing otherwise. 

The FHA 90 Day rule is especially important to: (not necessarily in this order)

1.  Agents/Brokerage

2.  House flippers (investors)

3.  Buyers that are FHA approved

This rule is probably one of the most important rules to a house flipper and really should be understood prior to purchase, upgrading and listing a flipped property.  If you are a buyer, your agent will let you know that the property is not FHA approved due to the 90 day rule.  This information is usally found in the agent confidential remarks of the MLS listing.  This rule is not limited to just foreclosure properties it can be short sale, traditional sale -- its when an investor purchases a home, upgrades it and put it right back on the market.

In essence:

• Time restrictions on re-sales - start counting from the date of last purchased date to the date of the execution of a new intent to purchase.
• A property is ineligible to be sold to an FHA buyer within the first 90 days after the most recent purchase.  It would be eligible on the 91^st day.      
• The price that the flipped is being listed to sale at:  Most investors want to get the most from the property and will do a few upgrades and then price the property for double the amount they purchased the property for.  There is nothing wrong with this and it is the name of the game.  However, it may mean that if you sell the property FHA there will need to be extra valuations of the property before it can close.  A second appraisal and documentation.
• Prior to 90 days - this would actually be the 91st day after the flipper was last purchased.
• If sold between 91 to 180 days: If property is sold after the 91st day of last purchase, the property is generally eligible for FHA mortgage insurance.  However, HUD will require that the mortgagee

Additionally, while not a formal requirement by the FHA, many FHA underwriters will stipulate that the 90 days doesn't start the day the seller purchased the property, but instead, on the day the Warranty Deed was recorded. And in many places, the closing attorney legally has at least 60-90 days to send the Warranty Deed to the records office, and it can take a week or two after that before the deed actually gets recorded; therefore, it could be 90 days or more after the property is purchased before the FHA 90 day clock even starts ticking! Meaning it could be up to 6 months before you can sell the property to an FHA buyer!

While not all FHA underwriters will require the 90-day seasoning to start after the Warranty Deed is recorded, keep in mind that some will. A good flipper will control his/her deal from the outset, and part of controlling the deal is to control the lending process; make sure you know the rules that your buyer's lender will be following to get the deal done, and if those rules don't meet your basic requirements, insist that your buyers use a lender that you are willing to work with (and who is willing to work with you).

So whether you are the buyer or the flipper (investor), check out the rules and regulations to the FHA 90-day rule.  It is showing up more and more on the MLS.

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Check it, jot it down now or run the risk of being blamed later!

With so many of the escrow transactions being foreclosed properties that are sold as is - where is - and if you the buyer is lucky there are some minimum repairs that the seller agreed to do.  As agents we have to be right on top of our responsibilities and inspect and make notations that will be in the records at the time of the transaction as well as for later on - when we get that call of complaint about something not functioning in house!  Department of Real Estate has a form that you need to fill out for this protection - use it!

This is the inspection you take the buyer with you and you "walk thru the property" and jot down what you see.  It doesn't take that much time and can be so valuable for you to have on file.  You complete the report and give it to the buyer to sign off on it.  Or you can rest assured you will hear from this buyer again!

New construction walk thru is much different from a foreclosure (as is - where is) transaction. Foreclosed you expect it to not in next to mint condition, however, a new construction you expect it to be damage free and all fixtures and structure to be in complete working condition, with nothing missing.

Sometimes escrows can get so drawn out that we just want the transaction to close and may think that it is OK to skip the final inspection because you have been out to the property so many times and you know what condition it is in.  NO good!  Put it on paper! Protect yourself. You must continue your agent buyer - protection all the way to the end of the transaction (or you may find yourself being blamed for something that does not work.... Or something that you forgot to Walk Thru with the buyer and check prior to close).

This is why the rules are set in place to do a Final Walk Thru on all escrow transactions.  Make a list of items that you will need to take a look at and make notation of the condition.

This applies even if there were no repairs done on the property and it was indeed sold as is, where is.  Final Walk thru is still a part of the transaction.

Questions to know

Were there any repairs that the seller agreed to repair?   You, the agent should have checked these where they were completed and yes, you will need to re-check with your buyer just prior to close of escrow.

Is there anything missing or damaged that was not there during first walk thru?  With all the vandalism going on around the country - check to see if someone came in and took any items since your buyer did the first inspection.  If yes, you will need to note the missing item - with the foreclosures if something is missing it is probably not the seller that took it.  Vandalism of some nature is probably to blame. Police report is required if vandalism is involved.

Once you confirm these items are intact, you should jot down all that you notice in the house.  Buyers sometimes will see you making these notations or hear you mention something and will want to revisit that item. 

Remember to keep your inspection simple if you are selling as is and the item of concern is not something that agreed upon to be repaired and it is not a safety issue.  Buyers want to get as much done as they can (understandable) - and if you know you will not be able to get the seller to do the repair or fix, please don't make promises to that buyer.  Repeat the Sold as is to them, but just make notation of the item of concern.

Start out in the front yard, back yard and do a complete walk thru the house.  Check doors, windows, locks, floors, walls, fixtures, AC, Heater, outlets, garage door opener, toilets, lights, trash out (this includes trash from side of the house), check the pool to be sure the pump works.  New homes structures: would include making sure it was built as promised, options are included, floors are meeting the walls correctly and all other items are in complete working order.  In a new building you will need to count the outlets too!

Note: New constructions you may have a better chance of negotiations with the seller, but be sure you get any agreement to make it right BEFORE close of escrow. If it is a foreclosure and there was no agreed upon repairs, it might a little hard to negotiate this late in the transaction, but it never hurts to ask and always be sure to write down the issue - document, document. And always document.

Happy Final Walk-thru and happy closing.

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How important is it to make sure you indicate on the MLS if a seller will/will not consider FHA financing?  Very.  How many calls and emails will it save? 

I believe this is why the MLS have a category for financing type.  Since FHA is coming back stronger than before, it is wise to assume that somewhere around 80-90% of the offers received and they are owner occupied will be FHA financing.  If not now, in the near future FHA will be the majority if the occupancy will be owner occupied.

Effective Dec 12, almost all of the FHA financing categories will require a 620 FICO score.  Things are changing in the lending world and it is going to get harder and harder to finance a home loan.

Thank you to those agents that either put it in the terms field or in their confidential agent remarks.  But when it is not on the mls at all - the first thing a buyer's agent will want to do is either call the listing agent or email them to get this information to avoid wasting their time on viewing this listing if it is not FHA.

The rant part: an agent that put no calls, no emails and have not indicated if FHA is possible.    This leaves us buyer agents in trouble with our buyers.

Oh and don't forget that some sellers cannot take FHA if they short of the 90 days required to resale the property to using FHA financing to a property that you just purchased (1-89 days).

So to make the home search a lot less stressful for agents and buyers -à Agents please use the terms field of the MLS and let us all know if FHA financing is possible. 

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Low List  vs  Property Value  vs Reality plus the waiting game is what a short sale is all about?

Let me just let you know that agents usually list short sale properties - low - in order to get some attention to that property.  They do not list low necessarily because there is something wrong with the property and it is not worth more.

Agents have been known to list low in order to get the attention focus on the property, in order to get the offer, in order to get short sale negotiations with the bank.  In some cases, even with a low offer the agent is able to get a counter back from the bank on what they will consider to get the short sale moving  -- but sometimes it backfire and they just denied the low offer.

Also, agents rarely have any idea of whether or not the bank will take the offered price (that is the list price) and cooperate by selling the home for less than what is owed on it.  Short sales are not automatic.  It is not "ask and ye shall receive" an approval type situation!

What they do know is that they must have an offer and the borrower/homeowner must have a hardship to show that they can no longer afford the property.

Low list is not the market value.  The bank will probably not settle for less than or at least much less than what the home is worth.  Also note: Banks do not use what the listing agent serve to them as market value of the property ~~ they will go and get a third party opinion (either BPO or appraisal) from another agent that is not associated with this property.

Low List vs Property Value vs Reality plus the waiting game is what a short sale is all about:

Low list: check the properties in the radius of (at least ¼ mile) and see if it is listed low.  If listed low: is it to get attention to the listing or is there something wrong with the property?

Property value: recent sales in the area (1-3 months), Average sales price per square footage.  Is the property of the same kind (comparable); is it short sale or foreclosure.

Reality: Will the bank entertain a short payoff on this property? Is the offer with the property value?  Will the buyer hold on to "the waiting game timeframe"? And is the borrower/homeowner really in a hardship and cannot afford to pay for the property?

Waiting Game: Will buyer hang on and in some cases will the borrower/homeowner hang on for the ride of waiting on the bank to decide?

Some good news about short sales:  FHA, VA, CalHFA, NSP and other programs are not excluded from Short Sales.

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And the buyer says ..... can we go out looking EVERYDAY???

The market is so confusing right now that it is almost that you have to take the buyers out to view properties at least 2 times a week!  The properties are not staying on the market long, the offers are going way higher than the listed price and therefore the offers are in Pending before you can set up an appointment to go out and view it.  Is this a good thing? What about your other buyers and other things you have to do during the day?

It is a good thing for the seller and the listing agent, but it is unfortunate for anxious buyers if there is no time to get the offers submitted before they are gone.

Fannie Mae has changed the way of their listings:

• 3-5 days on market before they will consider the offers ** this include the NSP buyers (assisted)
• Offers up to 15 days will only be for the owner occupied buyers
• After 15 days investors offers will be considered

Although we don't agree with all of Fannie Mae rules, these are a few good changes.

FHA buyers have enough competition and restrictions to their purchase -- this change should help them get at least a chance at the listings.  FHA will not lend on flips that are younger than 90 days.

While it is almost impossible to take one buyer out EVERYDAY... it is wise to go often so your buyer does not miss the buying opportunity.

Need an agent?  Give us a call...

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