freddie mac’s new flipping guidelines
DESCRIPTION
Freddie Mac has issued Bulletin 2009-24 and the Bulletin’s Schedule A gives guidelines regarding flipping. This has caused some confusion because it talks a lot about transactions that are prohibited or should raise red flags.TRANSCRIPT
Freddie Mac’s New Flipping GuidelinesNovember 24th, 2009Freddie Mac has issued Bulletin 2009-24 and the Bulletin’s Schedule A gives guidelines regarding flipping. This has caused some confusion because it talks a lot about transactions that are prohibited or should raise red flags.
However these guidelines are good for flippers and the Bulletin begins by saying,
“Property flips are not inherently illegal and not all transactions involving a rapid purchase and resale are improper.”
Specifically, regarding short sales and REO’s Freddie Mac says the following:
“Sales of properties that the property seller acquired at below market value after purchasing as a result of a distress sale (i.e. REO sale, short sale, tax lien sale, bankruptcy trustee’s sale, etc.), where any increase in the sales price over the property seller’s acquisition cost can be clearly shown to be a result of the difference (if any) in the market’s reaction to distress sales and typical arms-length market sales.”
The article then goes on to advise banks on how to use its best practices to ensure that a flip transaction is underwritten and disclosed properly. It also emphasizes the care the bank must make in reviewing appraisals and investigating title.
The main thing for an investor to remember is that proper disclosure will prevent problems in the future. Both sides in a flip should receive proper disclosure that a flip is taking place and most importantly, you need proper legal counsel to ensure that the transaction is structured properly.
www.DavidParkerEsq.com Free Consultation @ 914-862-0580
About David Parker
In 15 years of legal practice, David Parker has worked on a variety of corporate, real estate and business legal matters. Having also held non-legal positions in business, he is able to think outside the box and provide you with service that will enhance your goals.
He has handled leasing for office and retail landlords and tenants, joint venture agreements, financing and confidentiality agreements. In addition, he represents real estate developers and investors in all aspects of their real estate work.
www.DavidParkerEsq.com Free Consultation @ 914-862-0580