(This Post Has Been Updated – Please See Addendum At End.)
Recently announced on CNN and nation-wide media: Finally, the Bush Administration has taken a practical step to allow real estate investors to ease the foreclosure crisis. And it has inadvertently admitted that government is part of the problem with the market we have today.
On June 9, FHA announced a change in its rules. Previously, FHA would only insure mortgages on properties that had been owned by the seller for at least 90 days. The entire objective of this rule was to eliminate the ability of investors to buy a property for a great price and instantly resell it (aka “flipping”). Since FHA is the largest mortgage insurer in the country, FHA’s policy instantly dried up a lot of the market for property flips.
But the June 9 announcement from FHA is a major shift. FHA’s new policy is that they will not impose a 90-day ownership requirement on sellers, which essentially paves the way for real estate investors to get back into the very lucrative game of real estate flipping.
There are some limitations. The property must have been in foreclosure, and this waiver is supposed to last for only one year.
This is REALLY GREAT NEWS if you’re a flipper. There are so many foreclosures out there, and the market is showing all the signs of firming up and is even appreciating in many markets around the country.
Furthermore, this is fascinating, because the shift in policy is an implicit admission by the government that the activities of real estate investors and other real estate professionals are an asset to the functioning of the real estate market. Until now, I’ve not heard of any suggestion by the government that real estate investors (and particularly wholesalers/flippers) are anything other than “equity thieves” and “vultures”.
Here’s a hint for the government: Get out of our way with other stupid policies, such as the work that’s being done right now in the U.S. Congress to limit our rights to be involved in foreclosure consulting, loss mitigation services and creative real estate strategies (like subject-to transactions and contracts for deed). The economy functions best when you are out of our way, big brother. Remember: The mortgage meltdown is the result of bad economic policy from the GOVERNMENT, not from real estate investors.
This is eerily reminiscent of the S&L debacle of the 1980′s when the government began to make properties available at ridiculously low prices through the “Resolution Trust Corporation”. It’s sad to recall that time because it was SO EASY to get insanely great prices on properties, yet relatively few people took advantage of it, and lost out on MILLIONS in profits that were there for the taking. Let’s don’t make that mistake again, ok?
Sound off below – how will this effect your business? What other regulations do you think the government should remove for the benefit of the economy and our country?