Brand New Rules in Favor of Flipping

Residential real estate never used to like the term “flipping”, but things have changed since then. The latest changes in policies actually encourage flipping in order to sell more foreclosed homes, which are already horribly damaged – something that area realtors are also in favor of. There are hopes of this helping today’s struggling home market.

Back in the days when there was a boom in real estate and home values had risen, flippers could buy homes to sell them for a profit without increasing the value of the homes in any way. To stop this practice from going on, the rules were changed to forbid property flipping on properties financed with FHA-insured mortgages.

Because most mortgage activities today involve the FHA, some people are worried about the efforts made to stabilize neighborhoods hit by foreclosure, thinking that things will merely get worse because of the ban. This greatly involves the people who try to stabilize the neighborhood by buying and rehabilitating foreclosed homes and selling them to families with average income.

Many foreclosed homes exist today that are in extremely bad shape. Letting investors buy these properties, fix them up and sell them would be a great option since many people wish to buy houses but simply do not have enough money or knowledge to fix them up.

Banning flipping may not be the proper solution for the crisis of foreclosure, but it is definitely heading in the proper direction. This waiver even comes with a lot of safeguards to avoid inflated pricing. For example, if the home price is 20% higher than the last sale, sellers have to justify their price increase somehow.

However, some market variables may still prevent this waiver from affecting the locality too much. See, potential buyers are not aplenty anymore as the world seems to be running out of entry-level and first-time buyers. Plus, the neighborhood needs to be looked at, too. The fixed-up home might be night, but a neighborhood still filled with foreclosures will not make sales happen.

FHA financing is in high demand now, so the waiver will definitely benefit certain neighborhoods. What they need to do is get an owner for a home and improve the overall neighborhood while stabilizing the values and moving them higher.