You’ve just completed the renovations. New paint, carpet, kitchen, bathrooms, you name it. You took a nasty dwelling and completely transformed it into “home-sweet-home” for that buyer lucky enough to reap the benefits of your hard work and skill. AND YOU DID IT IN RECORD TIME. Two months after your acquisition, you are ready to throw up the FOR SALE sign. Woot! Life is good.
Okay, maybe not that good…
Have you considered the buyer pool in your market? Have you thought about who your buyers are? How knowledgeable are you and your listing agent on current financing guidelines? The fact that you are ready to flip that home in record time is nothing less than admirable. But if you don’t have the ABILITY to sell to a whole group of buyers or are unaware of potential hurdles, your timeline and patience are going to be tested.
So, what the heck is The MN Mortgage Mom rambling about now??? FHA. FHA buyers. And there is a whole lot of them out there. Statistically, FHA accounts for more than 30% of all loan originations nationwide. In many areas of the country, that number is closer to 50%. When I look at my own pipeline for the last year from the Minneapolis/St. Paul market, my FHA buyers constitute nearly 70% of all my originations.
I certainly am not suggesting as a seller, that you steer away from FHA buyers. Quite the contrary. What I am suggesting, however, is that you know the rules and guidelines. Knowledge is power and that power will keep ALL buyer pools open and get your flip to a successful closing.
So what’s the big deal about flipping your home in record time from acquisition? Simply put (given the example above), you might as well forget about the FHA buyer. FHA will NOT insure a mortgage on a property in which the owner of record has held that property less than 90 days. You may be thinking, “Well that’s okay. By the time we close, we will be over that 90 days.” WRONG. FHA defines that 90 days as:
- Seller must be owner of record for a minimum of 90 days AND
- The buyer’s purchase contract may not be dated inside those 90 days
In summary, you cannot go under contract with an FHA buyer until 90 days has lapsed from your date of acquisition. Time yourself correctly and you will open your home sale to hundreds of more buyers.
Other dates to be cognizant of:
- 90-180 days from acquisition: A 2nd appraisal will be required if the sale is between these dates AND you are selling your home 100% or above your acquisition price. NOTE: The buyer cannot pay for this appraisal.
- Up to 12 months from acquisition: Underwriter reserves the right to require additional documentation in support of the resale value. Note to flipper: If you have the home priced right and the appraisal report is able to identify and support the value, more times than not, you will sail right through this without having to provide any documentation.
What do you do now? Get that home up for sale and have it priced right. If you have a little time on your hands, that’s okay. If a conventional buyer doesn’t come around, you have a few days to re-polish the wood and perhaps throw in a furnishing or two to stage your finished gem. And when that FHA purchase contract presents itself, you are ready. “Ain’t no hiccups happenin in this transaction.” Right on…because you have the knowledge and that is a powerful thing.
Happy Selling from The MN Mortgage Mom
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