House flipping involves purchasing an undervalued property and quickly reselling it at a greater price. In some cases, minor renovations increase the home's value prior to resale; in other instances, the buyer does not even occupy the property before reselling. Kansas has no specific house flipping regulations; however, the state's foreclosure laws can affect the process of flipping a property. Furthermore, the Federal Housing Administration (FHA) regulates the mortgage process between you and your bank and has specific guidelines for flipping houses.
Kansas Foreclosure Law
Banks often want to clear foreclosed homes off their books quickly by selling the property at reduced rates, creating an opportunity for house flippers. Kansas foreclosures are administered through the court system with home sales possible within 60 days. In many instances, your likelihood of flipping a house is delayed by the state's redemption period. This period of time occurs after the home is sold at auction to the highest bidder, usually the bank. During the redemption period the original owner of the home may pay the amount of the highest bid and keep the property. Redemption periods between three months to a year are common in Kansas.
There are no laws that state you must use an FHA approved loan to purchase a house and then flip it; however, the agency has great influence over the mortgage market and thus shapes the policy that all lenders follow. One reason for this influence is the FHA's ability to provide lender insurance on as much as 97 percent of a property's value should that home experience foreclosure. This insurance is available if a lender agrees to abide by FHA policy regarding mortgages. The FHA also mandates regulations designed to curb uncontrolled flipping of property. A home you have owned for less than 180 days is subject to added inspections and other measures should a buyer apply for a mortgage on the property, and mortgages will not be given to buyers seeking a loan for a home you have owned for less than 90 days.
Flipping a house requires knowledge about the local market, including an understanding of area home buyer preferences. One of the most important factors is offering the home at a favorable selling price. Consideration of the real estate agent commission and the costs to renovate a property in need of repair must be taken into account. Many successful property flippers acquire interested buyers prior to purchasing a home. Flipping a house can result in very favorable gains provided you understand the many factors involved in this type of real estate investing.
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