I’ve been around since before Millard and Linda started Habitat for Humanity and it has gotten disgraceful indeed. My state refuses to let investors make more than 18% profit on foreclosures thanks to greedy investors who made the politicos feel they had to change the rules without knowing the industry, and to protect the traditional players. With expenses rising, you can’t even get the rents you need to keep your clogged invetory happy and healthy.

Something has to be done, but I doubt it will come from the real estate investor industry the way the players are acting lately.

Kim,

Thanks for your profound observations. May I ask in what state do you operate? Is it state law that restricts flip profits?

Thanks again,
Gary

We checked with Fifth Third Bank - FHA specialists (this week,we have contacts) and we as investors do not qualify as a vendors. We ( Fresh Start Property Solutions) short sale properties, pay cash and resale the same day. If you can become a vendor by becoming an REO company you might have a chance to qualify. We are going to tell our story to the FHA and see if we could become a qualified vendor. We keep neighborhoods from deteriorating, we get banks paid off, we give the ex-homeowner a fresh start (no liability for mortgage) and we give new homeowners a home at normally below market value. Everybody is a winner. We have a better impact than FHA itsself and most REO vendors. A few bad apples have made it for tough for the honest good guys. Would like to talk some time.

Steve,
Thanks for sharing this information. Please keep us posted on your efforts to become a “qualified vendor.” I would love to write a blog post about how this goes for you.

Sounds like your efforts to position yourself to profit here while helping to clean up the lending mess are nothing short of brilliant! Cheers to you!

Funny, I read a CNN article the other day that called real estate investors like us “vultures.” It amazes me that people fail to see the value of the services we provide — to communities as well as the markets.

If we’re “vultures” what are the lenders?!

Thanks again for your post. Can’t wait for an update! Hope your patience and determination really pays off!

Gary

I’ve had a lot of questions from clients in the last 2 days on the announcement Friday regarding the lifting of the FHA 90-day seasoning requirement. Apparently, there’s a lot of misinformation floating around.

I went ahead and wrote a quick summary of the whole situation, which I posted here:
http://briandickersonflips.com/blog/?p=39#more-39

I also posted a copy of the ruling to clarify.

Hope it’s helpful! Feel free to pass it on as you see fit.

Best Regards,
Brian Dickerson

@Gary Boomershine - Some really excellent points in there, Gary. And never let it be said that you’re not a man of words and action.
It’s not that I don’t think the FHA waiver will have any impact at all in the REI community. But it won’t have the effect many of us did initially. If someone can get clarification on exactly what kind of “vendor” the waiver might be referring to, then maybe we can figure out if/how an investor might put himself in that role. I’d appreciate anyone else’s insight on that particularly.

It also seems to me that in order for a mortgagee (lender) to be able to benefit from this waiver, they’re going to have to look at rehabbing many of the REOs in their inventory. Otherwise most of them won’t meet FHA’s standards for property condition, so the waiver would be useless. So it’ll be interesting to see how/if this effects the way banks deal with their inventory at all.

Thanks again for your insightful feedback. Anyone else?

As I said, “many flippers may find that this policy change id of little help to their businesses.” Still, I believe that the policy change is likely to have a positive effect on the real estate markets that have been choking on foreclosures. When that happens, we’ll have more options to develop and implement strategies to make money in real estate. I see this as a plus.

Like many of us, I’ve looked at FHA’s waiver language and puzzled over how they’re defining “vendor.” Still, providing for any sort of “middleman” position in between REO lenders and the market is likely to benefit investors either directly (if some of us assume that position and manage to profit from it) or indirectly (if the policy change succeeds in its goal of stabilizing prices and stimulating market activity).

Even if real estate investors become “vendors,” rehabbing costs are higher than ever, so bringing many of these foreclosure properties up to FHA guidelines poses an awesome challenge, even if weren’t for the massive price drops we’ve seen in real estate markets hard-hit by foreclosure. Still, I have faith that if anybody can find a way to make money here, the REI community can. Although it may be too soon to know exactly how REI will capitalize on this development, the innovation and resilience I see in our community always amazes me.

Buying homes when prices are down and selling them when prices rise is an excellent strategy for investing in real estate, but most of us prefer to have more than one way out of a deal. If FHA’s waiver succeeds in providing real estate investors with options, then I see it as a positive step — even if it’s a small one.

Another point that I made in my post is that the Fed’s so-called “anti-flipping policy” did more to reveal the government’s generalized ignorance about how our industry works than it did to protect consumers. Their rationale for implementing this policy was to discourage the “predatory lending” and collusion they automatically associate with flipping. Has this policy protected anyone? Or did it unfairly seek to regulate our business practices without legitimate cause?

Looking at many of the loans that lenders extended to consumers, it seems to me that the Fed’s time and money would have been better spent scrutinizing the real predatory lenders. Now, by suspending its so-called “anti-flipping” policy, the Fed is going out on yet another limb for suffering REO lenders who, like consumers, should have known better than to get involved with the risky mortgages to begin with. Who pays for these mistakes? If you operate your own business, you know the answer.

I agree that this isn’t an occasion for Champagne. But what’s a good mixer for irony? If you need a chaser, try this: It appears that in 2003 when the Fed’s “anti-flipping” policy went into effect, then Housing and Urban Development (HUD) Deputy Secretary Alphonzo Jackson was getting a sweetheart mortgage deal from Contrywide’s head Angelo Mozilo. You may recall that Jackson resigned from his leadership post at HUD a few months ago amid accusations of cronyism.

Go get ‘em JP. Your post on this issue are among the best I’ve seen. Please, keep on sharing you lively wisdom and analytical skills with the rest of us. Let’s hope that your common sense is as contagious as the foreclosure epidemic in Florida!

You said, “…our industry will see some benefits from the FHA’s temporary suspension of the 90-day waiting period for foreclosure sales…”

I’m not following you, brother. I don’t see how this 1 year FHA waiver will effect investors at all. Through this waiver, FHA financing is now available to borrowers purchasing properties owned less than 90 days that were acquired by foreclosure by mortgagees (i.e. lenders). It also pplies to any subsidiary of the lender or vendors they may use to market and sell the property.

But I don’t see the waiver applying at all to investors. We’re still stuck with the 90 day seasoning requirement, unless we’re the ones who actually foreclosed on the property. So I guess I could see investors benefiting if they buy the defaulting note and then foreclose.

Check out my blog post from yesterday about it: http://reitips.com/fha-seasoning-suspended/

…jp