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Legal risks of home flipping

With the rising costs of homes across the bay area, home flipping has become a popular way for contractors and others to make a substantial amount of money. There is value in turning an older home into something for today’s more modern clientele, but there can be quite a few legal risks that emerge as well.

Title concerns

Just because a property seems like a bargain doesn’t mean it is. Someone who is interested in purchasing a home for resale purposes should consider adding title insurance. It can be hard to determine who actually owns the home and who can actually legally flip it. Title insurance will make sure the property has a clear title in order to purchase and sell the property.

FHA restrictions

Many buyers use FHA loans to purchase a property. FHA rules state that a person purchasing a home using an FHA loan cannot turn around and sell the property before 90 days of purchasing. In addition, any resale of a home between 90 days and 180 days for more than 100 percent of the previous price will require additional documentation validating the property value increase.

Mortgage loan fraud

Many people who want to flip a house take out an initial mortgage to purchase the home. It is important for a home buyer to check a mortgage loan profession’s state and local licenses and make sure you understand the terms of the mortgage loan to avoid fraud.

A person who is interested in home flipping may want to consult with an attorney. Home flipping can be complicated. An experienced real estate attorney can make sure their client understands the process and legal challenges.