The Phoenix Real Estate market has made a big shift, and by big shift I refer to the inventory that is available. No longer are there hoards of bank owned properties on the market, right now a large portion of the inventory is short sale, equity seller (a normal seller that has equity to sell their home outright without the bank taking a loss) and flip transactions. The dilemma lies in the “flips”, so what exactly is the flippin dilemma you ask? I will get to that shortly but this blog was inspired by real life events that are happening in the market place. On a daily basis my job mainly consists of closing loans as efficiently as possible with the help of Team Electric Loan Officer, but recently I have fielded phone calls from Phoenix Real Estate agents that need some guidance and some insight from a Phoenix Lenders perspective.
I think that one of the biggest issues or most common should I say is that flip financing is an animal of a different breed and that there are a lot of Phoenix Lenders out there that have guidelines that prevent them from being able to lend. If you are a Phoenix Real Estate agent then it would be wise to pay attention so that if you are dealing with a lender you are unsure of or have not worked with before, you will know to ask the RIGHT questions to avoid loan fallout or loan denial. Here are the most common reasons Phoenix Lenders cannot fund flips.
Reason #1: The most common reason is that the property has been sold in less than 90 days, per FHA this is the definition of a “Flip”. To be more specific this means when the seller is on title for less than 90 days from the day you write a contract it could be an issue. If your contract is dated 91 days after the seller took title you will find that it might be a bit easier, however it may not be feasible to wait. Things to watch out for or ask your lender is if they have an issue with this and if they go by the sellers “acquisition” date or if they go by the recording date. When investors buy at the auction they acquire the property but usually the deed doesn’t come in the mail right away and it doesn’t get “recorded” for a couple weeks. Things to watch out for when looking for flips is that it is very common for an LLC to be the “owner of record” on the property. With FHA loans you will need a second appraisal however the conventional loans could have all types of different overlays or “hurdles” should I say, so make sure you ask about that as well.
Reason #2: The seller has acquired the property less than 90 days ago and my Phoenix Lender said that it is not a problem. Great I say, now ask them if they have an issue if the new “sales” price is greater than 20% above the sellers “acquisition” cost or what they bought it for? It may not pertain to your property, but make sure you research that ahead of time. I have heard of a lot of people with flip financing available but they cannot fund a transaction if there is more than a 20% increase in sales price versus acquisition cost. Make sure you do your homework here! FHA says that if there is a greater than 20% increase a full home inspection ordered by the lender is now required on top of the two appraisals… Yikes that’s getting expensive. HERE is the link to the FHA Flip Waiver talking about this guideline.
Reason #3: Multiple title transfers in less than a 12 month window. You can find out from the title company how many times the property has changed title in less than 12 months and lately I have seen some “double flip” transactions which can really blow a deal up.
Reason #4: This one is by FAR the least common, but I guess with the rapidly rising home values this could be a perfect market to see this happen. So the seller has owned the property for 5 months, ok great were don’t have any flip guidelines right? Wrong! Here is something that not a lot of people even know, I would have to say because a lot of lenders learn by their mistakes.. Yikes! FHA states that if the property sold less than 6 months ago and is more than a 100% increase from the sellers acquisition cost then this is considered a “flip” and you will need two appraisals! You say, there is no way that could happen right? Yes! I have personally seen it happen, but again it’s rare.
I can tell you that my company has been in the Arizona market for over 30 years and that we have A LOT of different investors that we use when needed, not to “toot” my own horn here but we are a very proficient Phoenix Lender and we don’t have any of the above mentioned issues, if you ever need me to take a look at a transaction and save it I am happy to do so just contact me now otherwise I will keep blogging in hopes that enough people read it and never find themselves in a snag.
As always, make some good use of the share bar to the left and send this to anyone who can benefit.
-Justin, The Electric Loan Officer
Need a Loan Officer you can rely on?
Whether you’re an agent or a borrower, fill out the form below and let me know how I can best serve you![gravityform id=”8″ name=”New Blog Lead!” title=”false” description=”false”]
Teachers want to produce an be based on our traditions of the regime, and more strategies that will encounter the. http://topessay.jimdo.com/review-on-edubirdie-com/ Are you interested? We bet you are! Sang-froid Impost Essay Writing Serving Its light to be a success! You dont want to drop watchful nights on deadening and non-contributing tasks. I Paying Soul To Write My Essay Outset big gate-like wanted to turn our recent quislingism.