Do you think extending the FHA anti-flipping waiver will benefit homebuyers?
- No. (57%, 121 Votes)
- Yes. (43%, 90 Votes)
Total Voters: 211
The Federal Housing Administration (FHA) has extended its anti-flipping waiver through 2013. Investors and the FHA Commissioner believe this is a positive move for the housing market.
Flippers renovate and move otherwise vacant, deteriorating properties, which negatively impact whole neighborhoods. Rather than drawing responsible buyers, neglected properties are magnets for vandalism, becoming neighborhood eyesores and potential hosts for criminal activity.
On the other hand, allowing homebuyers to obtain financing with the low FHA down payment requirement of 3.5% also stimulates the housing market by supplying more available buyers to purchase these properties from flippers.
The FHA is trying to mitigate the often negative financial impact of allowing buyers to flip properties by enforcing the following requirements:
- all transactions must be arm’s length;
- all sellers must have legal title to the property; and
- when the listing price is 20% greater than the price paid by the investor:
- an FHA-approved appraiser must conduct a second appraisal of the property; and
- an independent inspection report must be conducted.
first tuesday insight
If the FHA’s goal is to smooth the path to homeownership, feeding the population of flippers is the wrong way to go about it.
Flippers are already snatching properties out of buyer-occupants’ hands. An excess of flippers heightens competition among buyers, giving rise to bidding wars and cries of insufficient inventory, inevitably creating price destabilization. Flippers don’t need any more encouragement to sandwich themselves between sellers and buyer-occupants.
The FHA’s extension of their anti-flipping waiver delivers no benefit to buyer-occupants. Instead, it raises homeownership out of their reach by inflating home prices. High flipper/speculator involvement artificially increases prices and creates an illusion of demand.
The FHA no doubt hopes artificial demand will give the housing market a jump start and spark real demand among buyer-occupants. Unfortunately, current speculator involvement inhibits buyer-occupants. Flippers either outbid or pay cash to elbow buyer-occupants out of the way.
Buyers react in one of two ways. They either:
- offer to purchase at inflated prices in an exasperated attempt to outbid flippers; or
- simply give up and wait for their cash-heavy competition to abate.
Prolonging the anti-flipping waiver does not serve homeowners. It forces them to the sidelines while encouraging the already-domineering big boys from out of town to play harder.
Re: “FHA extends loan support for houses that investors buy, repair and sell quickly” from The Washington Post