Flipping your investment.The Do`s and Dont`s

During the past six months I have received numerous questions in regards to "Flipping" a property. Here is a question that was submitted to me last week.There are Pro`s and Con`s to Flipping a property. Like any investment there is always risk involved. In some cases selling a property immediately after you close can be very profitable and in others it maybe wise to wait six months to one year before you sell. The following question was sent to me last week.
Question: We recently purchased a home in Sunrise priced below market. My wife and I attempted to sell it right after closing. I received an offer in 7 days and accepted it. The money was placed in escrow. The buyer did the required inspections and the Bank sent out the appraiser.Three weeks later I was informed by both my Realtor and the Title company telling us we couldn't sell my house right away and that I have to wait three months before putting it back into the market. Is this accurate? The contract was cancelled and I need to know if my Realtor is correct.
Answer: As far as I know, there is no law or regulation that prevents anyone from purchasing a house one day and selling it the next, a process also known as "flipping."Although many lenders today will not give the Buyer a loan. Normally, I would suggest to the seller to wait the 90 days from the day you close. Fannie Mae is really cracking down on "Flipping" on this type of investing Peter Konsoulas from Homebanc recently explained to me. Mr. Konsoulas went on to add "In many instances Banks are shying away from certain types of loans and investments.They fear that too many investors are purchasing properties with the sole intention of "Flipping".
In the last year I have encountered many builders who have added clauses in their sales contracts that prohibit buyers from putting their homes back on the market for a period of time after closing -- usually a year. The real issue here is whether such clauses are enforceable I have yet to find a case or lawsuit where the builder was actually able to enforce that rule.Again, it`s wise to understand what your signing prior to purchasing a preconstruction property.
If you purchased a new house, your agent should have at least warned you what may happen. When going to List a property for an investor I explain it`s easier to hold the property and resell it within 90-180 days. Banks will look at the sale with less caution. I would like to know the exact reason why your Realtor is unable to assist you and give you the proper answer as to "Why you had to cancel the contract rather than having the Buyers agree to a later closing date". The only thing I`m wondering was did you purchase a property that didn`t have clear title?
My philoshopy is that you should purchase an investment property with the complete understanding that you should hold it for at least six months. Selling a home in a shorter period of time in most cases doesn't do as well. In our opinion using this stratergy is the safest approach to use when investing.
In today`s housing market most people purchase a house to make it their home. They reside there for five to seven years on average. Flippers have a much shorter time frame, usually less than two years and often much shorter. They may or may not live in it themselves, and they may or may not rent it to others. They may make only cosmetic repairs or they might perform a complete overhaul.
About the only thing they have in common is that they typically want to get in and get out, making a substantial return on their money in the process. And that kind of flipping is very much a legitimate form of investment, even if it is sometimes highly speculative.It`s always wise to consult a Realtor or an attorney who have knowledge of the Real Estate market, before "JUMPING IN", to an investment that may not be suitable for you!