Thursday, February 25, 2010

FHA 90 Day Flipping Rule Suspended for 1 year

Great news for investors! Admitting that it is in fact possible to buy, rehab, and sell a property in less than 90 days, the Federal Housing Administration (FHA) has suspended it's infamous 90 day seasoning requirement! This is also great news for home buyers, as this suspension should effectively allow quite a few more houses onto the market that otherwise would be just "seasoning" (aka sitting) on the market for 90 days.

Before we get into this too deep, lets first get an idea of what this seasoning requirement originally entailed. Basically, since 2003, the FHA has required that a house is "seasoned" on the market for 90 days before it is allowed to be resold. This means that an investor or any other person who purchased any property, property for rent or for selling, had to wait for approximately 3 months before they were allowed to sell the house to an FHA insured buyer.

More than anything, this was done to prevent people from buying a house and immediately selling it at an inflated price to a naive or uninformed buyer. Luckily, over the past several years, most of the riff raff has been weeded out of the market, and this type of practice isn't as widespread, or even really possible (as you will see from the rest of this article).

So, this is obviously good news for investors, but why is it good for home buyers? Well, per the official waiver:

"...the 90-day resale restriction often hinders community stabilization and revitalization." They also said:

"FHA borrower, because of the restrictions we are now lifting, have often been shut out from buying affordable properties. This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity."

Basically what this means is that more houses will be put on the market that were otherwise just sitting there collecting dust. Consequently, this presents more options for people looking for the perfect house!

BUUUUUUT......before you get too excited, it should be noted that there are several specific nuances to the waiver that investors and home buyers alike should both be aware of.


1. Seller MUST Hold Title

In other words, the person who is selling the house must legally and officially own the property, and thus, be on title. In fact, FHA will expect to see the investor/seller as the owner of record as of the date the contract to sell to the FHA buyer is executed. Long story short, no more back to back, same day closes to FHA end buyers. Sorry.

2. You Still Need Short Term Funding

Basically what this means is that if the property doesn't sell immediately you need to be financially able to make the payments. Be prepared to come up with short term funding for however long it takes to sell the house. Luckily, in most cases, it is easier to find 30-60 day financing compared to 90.

3. Is There A Flipping Pattern?

This is an easy step. FHA mainly wants to know that the subject property doesn't display a history or pattern of previous flipping activity. You can go and check the title from last year to see if the property has changed hands very often. Best case scenario would be not at all.

4. The 20% Rule

If the sales price exceeds 20% of the previous purchase price, you will have to show proof that you actually made repairs making the property worth that much more. This is done to ensure the sale is legitimate, and can include a full FHA inspection, or even a second appraisal. The best way to combat this is to simply take accurate records as proof of what you did to enhance the value of the property. Take plenty of before/after pictures, document the entire process, and you should be fine.

Other Important Points:

- All transactions must be arms-length

- Assignments of a contract for sale will trigger a red flag. No taking over deeds for people.


The better documented your case, the better chance you have of the process going smoothly. As always, if you have any questions please don't hesitate to CONTACT US and we will reply to your query as soon as possible. I also urge you to read the original waiver from the FHA regarding the subject matter:

Wednesday, February 17, 2010

How To Avoid Identity Theft

According to the Federal Trade Commission, 9 million Americans become victims of identity theft every year. Someone may obtain a credit card in your name and spend thousands of dollars for which you get billed; someone may rent an apartment using your personal information, and you get billed or harassed by debt collectors; in the worst cases, a crime may be committed using your name, social security number or other personal information.

Identity theft can be a very serious issue. If you are a victim, you may have to spend considerable time and money repairing the damage to your name and your credit record. You may not be able to secure education loans or other kinds of funding, and you may be denied jobs for which you qualify otherwise. In the very worst case, you may even be jailed for a crime you did not commit.

People can steal your identity in many ways. They can steal it directly from you; a misplaced wallet, unlocked personal office, lack of online precaution can all result in identity thefts. They can also do this in more ingenious ways. Dumpster diving is one way; thieves rummage through trash in dumpsters and look for old bills or other documents with financial and personal information. There are also social engineering methods like phishing, and also offline methods like diverting your address to get your personal documents, or pretexting, calling up institutions on some pretext to get your information.

In order to avoid identity theft, you should first know how it is done. That way, you will develop your own precautionary measures to stop the theft. Here are also some standard measures people should adopt to be protected from identity theft.

First off, you should develop a healthy paranoia about identity theft. Don’t ever give out your financial information to anyone. This includes bank account number, bank account address, debit or credit card information, even your social security number, which ties up many of these other data. When using your credit card offline, make sure to purchase only from well-known stores. If you are making an online purchase, you need to be even more wary. Look for the ‘lock’ sign in your browser, which shows that the webpage you are purchasing from is secured by a Protection Agency like VeriSign. Also, make sure to purchase from the actual websites of well-known merchants, and avoid purchasing internationally.

If you are on credit marketing lists, call up 888-567-8688 (your social security number may be required to verify your identity) and get off such mail lists. Scammers will often steal your mails and use your information to buy credit cards or secure a loan. Also, if you are serving in the military, set up an active duty alert on your credit files. Credit agencies take extra precautions in such cases, before granting a loan application.

One of the most important things to do is to get regular credit reports form one of the credit rating agencies, the Equifax, Experian or TransUnion. You are entitled to a free credit report once a year; your state law may allow you more free reports, just check. Either way, make sure to stay on top of your personal finances, so you know anytime there is an anomaly.

Friday, February 12, 2010

Invest In Commodities And Diversify Your Portfolio

Why You Should Diversify?

Any smart investor will tell you that it is important to diversify your investment portfolio. Diversification doesn’t just mean investing in different investment products but it also means investing in products that have low or no correlation to each other. Such investments are also called Alternative Investments.

Alternative Investment Options

There are many different options when it comes to alternative investments, such as Hedge Funds, Private Equity, Real Estate and Commodities. All these investments have a low correlation to traditional investments such as equities, bonds and money market funds.

Where Can You Invest?

As a general investor, you probably will not have access to hedge funds and private equity. The options for you then are investing in real estate and commodities in order to diversify your portfolio. In this article, we are going to discuss about investing in the commodities market.

Commodities markets have garnered a great deal of interest in the recent past as prices of commodities went up. ‘Commodities’ has developed into a separate asset class for people looking to diversify from traditional asset classes such as equities and bonds. So how do you gain exposure to this asset class?

Alternatives In Gaining Exposure To Commodities

You can gain exposure to commodities through different alternatives such as Direct Investments, Commodities Derivatives, Commodity Funds, Equities related to Commodities and Exchange Traded Funds. As a general investor, it is not practical for you to invest directly in physical commodities. Commodities, Derivatives and Funds are options for the more sophisticated class of investors that can actively manage their portfolio. Therefore, the options available to you are investing in Equities related to commodities and Exchange Traded Funds that track commodities indices.

Equities Related To Commodities

One of the ways for you to gain exposure to commodities is through investing in equities of listed companies that derive majority of their revenues from buying and selling physical commodities. The profits of such firms depend on the prices of commodities. However, this would require some active management from you.

Exchange Traded Funds

Investing in Exchange Traded Funds that track commodities indices is one of the easiest ways for you to gain exposure to commodities. By investing in Exchange Traded Funds, you can gain exposure to a number of commodities as an investor and do not have to actively manage your portfolio. Exchange Traded Funds can give exposure to the entire asset class. Exchange Traded Funds are traded on stock exchanges and are open ended securities which mean that you can exit from your investment easily. Exchange Traded Funds are highly liquid and are traded on regulated exchanges.

Our Recommendation

Currently, investing in funds that track gold is a good option for you as gold prices have seen a surge in prices. There are many Exchange Traded Funds that track gold, such as the Market Vectors Gold Miners ETF traded on the New York Stock Exchange. The fund gives you exposure to gold by replicating the NYSE Arca Gold Miners Index as closely as possible. Market Vectors Gold Miners currently trades at $42.77. The SPDR Gold Trust ETF also gives you exposure to gold. The fund currently trades at $106.53 on the New York Stock Exchange.

How Much Should You Invest In Commodities?

In this article, we have discussed the ways you can diversify your investment portfolio by investing in commodities. So how much of your portfolio should have exposure to commodities? The answer depends on your risk appetite. Commodity investment has its fair share of advantages. It provides a natural hedge against inflation. It has a low correlation to equities and bonds. However, commodity prices can be very volatile. We only have to look at price of oil in the last year and a half to gauge how volatile commodity prices can be. Therefore, if you are a risk averse investor, we recommend that you only dedicate a small portion of your portfolio to commodities.

Long Term Outlook For Commodities

As we have seen so far, investing in commodities can help you to diversify your portfolio and provide you with protection from inflation. The long-term outlook for commodities depends a lot on demand from emerging economies like China. Commodity prices have been lower in the recent past as demand has lowered due to a downturn in the global economy. However, with a recovery in global economy, we can expect that the demand for commodities, especially from emerging economies will be solid. Our long-term outlook for commodities is therefore bullish.

Monday, February 8, 2010

Mortgage availability increase 'brings new hope for first-time buyers'

First time buyers have received some encouraging news, after figures from financial information service Moneyfacts revealed that mortgage availability is on the rise.

The number of mortgage deals currently available on the UK market has increased significantly over the last month and approvals are becoming more frequent as lenders continue to relax their acceptance criteria.

The figures show a 20% spike in deals from the beginning of 2010, with a number of mortgages now requiring a deposit of just 10% - a vast improvement compared to recent months.

The credit-crunch shook up the money market, causing instability in the lending sector, which proved to be particularly hard on first-time buyers, demanding large deposits in order to secure anything half decent in order to get on the property ladder.

Many fist time buyers were forced to turn to their parents for financial aid, although the debt risks associated with high loan-to-value deals have dropped.

Since October – at a time when 66% of deals on the market required a at least a 25% deposit, lenders have eased their lending criteria. This figure fell to 6% at the beginning of 2010, and down further to 58% at the start of February.

The availability of mortgages may have also been affected by the recent increases to property prices which has cut the amount of risk to lenders.

Recent figures indicate that there are now around 1,700 mortgage deals available - the highest number since November 2008. This suggests an increase in competition on the mortgage market

If lenders decide to raise the cost of their variable rate mortgages and single out deals to promote to the relevant audiences, for example those who are considering remortgaging a property, this trend could continue.

Darren Cook, of Moneyfacts said: "Better rates and an increase in appetite to lend could indicate that lenders are opening their doors just a little wider and trying to compete for business.

"If standard variable rates continue to rise, many customers will be forced to find a better deal elsewhere and lenders may now be wise and gearing towards the prospect."

Ray Boulger, of mortgage broker John Charcol, said: "It is a continuation of the trend we have seen for the last three or four months, none of the cuts have been massive, with lenders cutting a few selected rates rather than all of their rates.

"The reason for the trend is due to a bit more competition in the market. We will see a bit more activity in the market this year."