September 20, 2017

Regulations on the sales price of a fix and flip

We had a great question from a prospective investor this morning – “Are there regulations regarding the asking price when an investor puts their fix and flip on the market?” 

Our answer… as in all real estate questions – “It depends!!!”

Yes, if the new buyer is using an FHA loan to purchase the fix and flip… FHA has some guidelines on seasoning and the purchase price… if the fix up home is owned less than 90 days and is sold for more than 120% of what the Seller purchased it for – then they’re going to require 2 appraisals and want to see all the receipts of the upgrades and repairs that the Seller made to justify the price increase.

 9 times out of 10 – the price on a fix and flip is going to be more than 120% of what the investor purchased it for.

 But, the great news is – last year (2011) in Phoenix, over half of the buyers buying houses – were made with cash and conventional financing – and there are no seasoning requirements on those loans (conventional loans just require a desk audit which usually there aren’t any issues)… so those odds are nice too. 

However, if you do have an FHA buyer interested in your fix and flip – just make sure you’ve budgeted to pay for one of the appraisals (required by the FHA lender) and that you’ve kept all your receipts and invoices on your fix up house.

If you’re interested in buying a fixer upper or purchasing homes in the Phoenix area that are fixer up houses- contact Jason Dawson today to schedule a time to talk on the phone at 480.442.9809 to let us know how we can help.

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