Once upon a time, in a land called the Twin Cities housing market, a duplex buyer could purchase a foreclosed or run-down property, renovate it, and turn around in short order and sell it for a profit.
It was a good thing.
Until, of course, Evil Fraud Doers saw it as an opportunity to artificially inflate the value of a property, conspire with an appraiser and sell it for an unreasonable profit.
In 2006, seeing a blight upon the land, along came the Department of Housing and Urban Development (HUD) . They decided to right this wrong by refusing to grant mortgage insurance on any FHA loan on a property where the seller had owned it for less than 90 days. This, they hoped, would keep the Evil Fraud Doers from pillaging and plundering.
It was then that a dark cloud formed and a cold wind began to blow, bringing with it the flying monkeys of foreclosure.
Suddenly there were properties everywhere that needed help. In an effort to encourage investors and rehabbers to fight the wounded inventory, in 2009 HUD briefly lifted it’s “anti-flipping” rules. This allowed properties to be fixed up and resold to first time home buyers who generally had neither the cash nor experience to undertake the battle.
The petulance continued. And yet, HUD ended it’s ban.
So what? If you’re a rehabber just wait three months to sell, right?
Well, the moratorium actually starts the day you close. And it isn’t waiting 90 days to close on a resale. Rather, it’s waiting 90 days before you can even look at a buyer using either an FHA, or often, conventional loan.
And since it’s likely to take 30-45 days to close on a resale, you’re actually looking at having to hold the property a minimum of four months. In other words, if you don’t have you’re rehab property in had by the end of this month, it’s likely you won’t get a chance to resell it.
On the other hand, if you’re a buyer who missed out in one of those multiple offer scenarios on a duplex ripe for renovation and we’re hoping to buy it once the repairs were done, you may have to wait until spring; when everyone else is wishing on stars too.
Wish I had a magic wand to use to lift that anti-flipping rule just one more time. There simply aren’t enough duplexes in good condition and a fair price out their for my clients to buy.