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Destin Florida Homes for Sale and Destin Florida Condos for Sale for "Flipping."
Even though this article was initially published in Florida Realtor Magazine to warn the consumer and the Realtor® about the dangers of Destin Condos for sale for the purpose of "flipping" it, it is also applicable to the purchases of Destin Homes for sale and all Destin Real Estate with the sole intention of a quick flip to another buyer.
Please read the article and if you have any questions or concerns, please contact me at (850) 267-3620 or email me at jim@jimcole1.com. I hope that this article is helpful. More information on "flipping."
Lenders Scrutinize Destin Real Estate “Flipping” Sales
Real estate professionals active in the state’s new-condo market should pay close attention to the financial aspects of “flipping” units, according to Florida mortgage lenders. While a qualified buyer can readily obtain a mortgage loan to buy a new condominium, there can be snags in the process for “flippers” aiming for a quick resale.
Some condo developers allow a flipper to assign the contract to another buyer prior to closing — although that practice has been curtailed by stiffer construction loan requirements designed to reduce speculative sales.
In some assignments, the flipper pays a fee to the developer, and is out of the transaction — hopefully with a profit. But if there is no assignment clause, the mortgage company and the developer may require the flipper to close on the unit before reselling.
Destin Homes for Sale Destin Real Estate Sandestin Condos
“We won’t lend money on a property you don’t own,” says Tim Allen, senior lender, Collier County, Chase Home Finance in Naples, and vice president of the Mortgage Bankers Association of Florida. “We need to see a title policy that says you’re the actual owner of the property.”
Except in an all-cash transaction, the flipper would need to obtain some type of mortgage with no prepayment penalty. “We wouldn’t even consider issuing a loan for three months,” says Allen, “but there’s no reason a buyer couldn’t take out a 30-year loan with interest-only payments for three years.”
After taking ownership, a flipper may find it more difficult to resell the unit than expected, according to Gilda Iriarte, a mortgage consultant with Infinity Mortgage Group in Miami. “People buying from flippers are having a much harder time,” she says.
The big problem is the sudden jump in the unit’s value on the second sale: why is a unit purchased for $200,000 suddenly worth $275,000? “In many cases, the appraiser can’t substantiate the increased value necessary for the flipper to sell the unit,” she says.
In fact, the Federal Housing Authority (FHA) stopped making loans to borrowers who were purchasing from sellers who had owned the unit for less than four months and were unable to show receipts to support the higher value, according to Iriarte.
Today, the lender may require more than one appraisal in a condo flip sale and will usually go with the lowest figure, says Iriarte. “If the appraisal comes in at less than expected,” she adds, “the new buyer may have to come up with the difference or walk away from the deal.”
Destin Homes for Sale Destin Real Estate Sandestin Condos
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