Guest Post: FHA Takes Steps to Boost Foreclosure Sales

The federal government hopes to help low-down-payment home buyers, investors who fix up foreclosures, and communities burdened with too many bank-owned and foreclosed homes — all with one potentially far-reaching policy change.

The Federal Housing Administration revised its long-standing anti-flipping rules effective Feb. 1 and just might score a hit with all three target groups. For years, the FHA has had a strict prohibition: It wouldn’t insure a mortgage on a house if the seller had owned it for less than 90 days. The ban was a reaction to fraudulent quick flips of houses that inflated their values far beyond market worth. The flips often were pure cons: Buyer A would acquire a low-cost house in bad repair, make minor cosmetic changes and resell within days at a significantly higher price to Buyer B, who was also part of the scheme. The sequence could involve a string of serial flippers within a month or two, with prices spiraling upward.

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Lease Options – Please Help!

Over the past month I’ve received a number of questions from both clients and agents regarding Lease Options. I’ve summarized the basics around lease option agreements in this post. I recommend that you speak directly with an attorney or your principal broker about the specifics of helping your client fill out the forms. Here are some of the highlights that I train my team on:

OREF Definition: Simply stated, an option is nothing more than an agreement by an owner to sell a property to a buyer for a fixed purchase price. The offer remains locked in at the fixed price for a certain period of time, during which the buyer can “opt” to buy the property for the agreed price – or walk away with no further obligation. During the option period the seller cannot revoke the offer, change the price or any of the agreed-upon terms, or sell the property to someone else. Obviously, there is value to a potential buyer to have this ability to unilaterally buy or not buy, and for this right the parties must agree upon the consideration – i.e., the price for the option, which is normally paid up front. An Option Agreement differs from a Sale Agreement in several ways, but one of the main differences is that the option consideration paid by the potential buyer is nonrefundable (assuming the seller doesn’t default under the Option Agreement), regardless of whether the buyer decides to purchase or walk away. If the option is not exercised by the buyer within the agreed-upon time period, then the right of purchase for the fixed price expires and the option consideration is retained by the seller.

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HUD: Tax Credit Can Be Used on Closing Costs

FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.

Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.

The loans can’t be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.

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