Combined with the extension of the $8000 tax credit for first time home buyers and this promises to move a long list of distressed properties to new home ownership and avoid the growing number of vacant and therefore at-risk properties. The effect of this waiver will be to bring distressed property rehabbers back into market. It will benefit Real-Estate-Owned (REO), or bank-owned properties the most.

If the resale price is 20% higher than the investor’s purchase price, the investor will have to demonstrate proof to an independent appraiser that renovations and repairs justify the higher price. This will assuredly trigger two appraisals. New property appraisal rules make this possible.

Basically Freddie Mac financing will benefit. Fannie Mae will hold off and check the progress of this development. When they see the anticipated significant benefit, they’ll be along directly.

FHA buyers pay retail price usually because of their less-than-prime credit. The refusal of mortgage financing by conventional lenders is well-known. This should move a lot of property to occupancy and performing asset status, as well as allow rehabbers to comfortably return distressed properties to excellent condition.

The new seller/owner/investor must hold title to the property. This will prevent the same-day double close so prized by the real estate flipping investor. It’s estimated that it will take two weeks or more for the investor to enable title work to be filed and recorded. Still, two weeks is much better than the 90 days that investors have had to endure for decades.

Buyers and sellers in what is referred to as an A-B, B-C transaction (B representing the investor) must be at ‘arms-length, or no relation. There can be no financial advantage to the original seller. On the other hand, the investor is not required to reveal their profit to the original lender.

The property cannot show a history of ‘flipping’.
Assignments of Contract for Sale will trigger a red flag.
The seller must be Owner of Record.
Entities such as LLCs, corporations, and trusts must be properly established and operating in accordance with applicable state and federal law.

There are minimum inspection requirements for the property. Investors will be encouraged to include as many closing costs as possible in the A-B transaction.

As someone who has watched the lenders do everything they can to avoid mortgage modification, short sale and REO sales for the last year; take that, Bank of America. Your turn is coming.

Current FHA qualifications are a minimum FICO score of 580 for a 3.5% interest rate. 3% down payment. Below 580 needs minimum of 10% down. Seller contributions will be limited to 3% summer of 2010, down from 6%. a day late and a dollar short

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