The policies that guide different lenders are constantly changing. This is one reason why it is always best to use experts who specialize in Short Sale negotiations with the lenders. Those who do not work at these negotiations day in and day out cannot possibly know where the hang-ups will come until a lot of time has been wasted and it is too late to repair. You can get 90% of a deal right and then find that it fails on something that you didn’t know about. This is a strong argument that you can use with Agents for farming Short Sale negotiations to our specialists.

We received word this past week that Wells Fargo has issued a new credit policy for house flipping, and it is good news for those who are using our transactional funding, or funding from another short term lender.

The rules are still tight and must be followed precisely:

1. Down payment and cash needed to close must be fully documented, but transactional funding is allowed if it meets this rule.

2. Second mortgages are allowed to help fund a deal.

3. No gifts are allowed; no funds from the seller.

4. If the increase in the Investor seller (the B in A to B and B to C transactions) sale price over their purchase price is more than 15% then two full appraisals are required. An exterior appraisal will be ordered if the difference is less than 15%.

5. A LoanSafe report will be reviewed with full information about sales, property history, buyers and sellers of nearby property, etc.

6. Traditional means of marketing must be used, including the MLS or a traditional auction, or marketing by a developer if it is a new home.

7. No assignment clause will be allowed. There must be no change of hands of the property from the party who signs as the B party in A to B and the B party in B to C with a 12 month period unless it is a lender or asset management service such as ones that banks use for REOs. All contracts will be reviewed to make sure names are the same and the documents meet standards.

8. The seller must hold title with clear chain of title.

9. No bogus owners. An LLC, corporation or trust that takes title must be fully documented.

10. All transactions must be arms-length. So, for example, the Investor cannot sell the property back to the original homeowner or one of their kin.

The Wells Fargo instruction document to their processors states that “Due to current market conditions having a large volume of distressed properties, the existing policy of not allowing financing for flipped properties has been revised. Legitimate property flipping transactions are now eligible to be financed by Wells Fargo Home Mortgage…”

Wells is such a large and influential Lender that chances are strong that other Lenders who have been reluctant to accept flips will begin doing so in order to get this housing crisis behind us faster. It is a clear recognition by a major player that Investors who serve as middle-players in the these transactions play a legitimate role in cleaning up liens and helping with Short Sale negotiations, then finding buyers quickly for these properties. Our work clearly saves Lenders money and gets Homeowners out of a nightmare situation with less permanent credit damage. Flipping is now being recognized as a win-win-win combination.

Talk about a nice surprise for the holidays!