Buying a Flipped Property

     In today's market there are basically two different types of investors who flip houses. The first is one who buys a property with the idea of doing a little as possible to the property before putting it back on the market. Although the investor has done as little or nothing in preparation for the sale they still expect a maximum dollar for the house.
     Then you have the investor who  has formed a LLC, Limited Liability Corporation, and has access to contractors who are ready to make the repairs quickly and efficiently.  After the property is purchased they will have an inspector go through the house and make a list of all required repairs to insure it is in good condition before putting the house on the market.  They too want the maximum dollar for their investment. 
     In both of the above cases the properties will be put on the market for the maximum market value.  When showing houses that are being flipped I am weary of the first type of investor. These properties have a higher chance of hidden problems for the buyers.  Fresh paint may hide potential problems of moisture build up around the windows or a recent roof leak.  It is easy to determine which type of investor is selling the property by looking at the quality of repairs and what has been fixed.  In the case where you have a "want to be" real estate investor I make my clients aware any potential or hidden problems.  In the second case it is much easier to recommend the property to a client as long as they realize they will be paying top dollar for the house.  Paying the higher market value is not always a bad thing if you are getting a quality product that is move in ready and will require less maintenance in the long term.
    So it isn't always bad to purchase a flipped home for the upper market value if it is in top condition.  Would you not pay top dollar for a house from the original owner if they kept it in great condition?  In most cases it is a psychological issue with the buyer knowing some one is making a profit with an investment verses their home.  It is okay to pay the higher market value as long as you are getting what you paid for and not a lot of hidden problems.

New HARP II Guidelines (Cont.)

According to the latest update about the new HARP guidelines on various real estate websites it looks like the revised HARP will not be ready until March or April of next year.  Currently the government has sent the rules and regulations to the banks.  The servicers who have Fannie Mae and Freddie Mac backed loans are required to participate in HARP.  However you do not have to use your current lender to do a HARP refinance.  If the loan is not backed by Fannie Mae or Freddie Mac the lender does not have to participate although they are encouraged to do so.  It does appear that it would be advantageous for the banks to modify more loans to save money from the foreclosure process.  A new update will be sent out when any news is released.

New HARP Guidelines

The federal government has introduced a new Home Affordability Refinance Program (HARP) that gives hope to some homeowners who did not previously qualify for the original HARP program. The HARP program that was introduced in March of 2009 would only assist home owners who did not owe more than 125% more than the current value of their house.  This limitation has been removed with the new program.  Don’t rush out and ask your lender if you qualify for the new HARP program as the FHFA will not release all the new guidelines to the banks until after November 15^th.  It appears there will still be limitations of how the new program will work since it is expected to only help approximately 1.8 million borrowers.  However if you are one of those homeowners it will be worth looking into.

            I will submit another blog with the details of the new program once it is posted to the public. If you or any one you know would like assistance with a better understanding of the new guidelines give me a call, (209) 612-7737, and we can review your situation together.