November 22, 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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Flipping a house with a Realtor

If you feel you need someone to assist you in your flipping projects,


then getting a Realtor is the right decision. Working with a Realtor
may be uncomfortable to you at first but as soon as you get to know
each other and develop an open communication line, everything
will go on smoothly. It’s okay, though, if you want to be extra
careful because the Realtor will be part of your personal experiences
once you make a commitment. 

A good Realtor should explain to you what to expect from the buying
and selling process as well as your rights and obligations.  They should
inform you of the area and types of homes you wish to buy, the turn-over rate in the area you target and if the location has a good resale potential. They should not pressure you into making decisions but rather should guide you in making the right choice concerning your needs, wants and expectations. 

Always keep you communication lines open to avoid misunderstanding and misinterpretations on some vital information. Feel free to share your views and other things that bother you. Be sure to ask for written documents like a comparable market analysis to find out the prices of homes that were recently sold in your area. A dedicated Realtor, however, will provide you with these documents without you asking for it. 

Remember that Realtors work for your best interest. They know their work and are well-informed about their local market so you can rest assured that they will help you look for the right homes to flip and the right buyers when you resell the home at the highest possible price. 

Realtors are experts in the real estate business and are members of the National Association of Realtors (NAR). As NAR members, they are required to follow a code of ethics to assure their honesty and integrity in all their work. Their knowledge, training and skills should greatly help you in the negotiation process. They also have access to the multiple listing service (MLS) in marketing your homes and to pre-qualified buyers who are bent on buying homes in your area. 

If you plan to continue your home flipping ventures for a long time, it’s best that you stick with your trusted realtor. They work fulltime to meet your needs so give them the respect due them. If, however, you feel your realtor is not doing you a great job, by all means look for another one.

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How To Sell A Fix and Flip

You must be able to document your work to justify the upgraded value that you want for the work you’ve done.