Buying, renovating, and re-selling properties have become an increasingly popular source of income. However, while flipping houses can reap generous rewards, there are some disadvantages people should be aware of before making such a significant financial commitment. It’s a riskier type of investment with the potential to go wrong if not approached correctly. There are a few legal risks, in particular, that the residential real estate attorneys from Greene Law PC in Farmington, CT, believe all investors should carefully consider. 

The Hazards of House Flipping 

1. Title Problems 

Homes often pose challenges about who the owners are and who has the right to sell them. Before a property can be purchased and re-sold, the buyer must acquire a title. A residential real estate attorney will help identify who the property owner is through a title search. 

2. Mortgage Loan Fraud 

Most homebuyers require a mortgage loan to finance their purchase. Although this is standard procedure, borrowers who have intentions of flipping a house should be wary of mortgage fraud. Lenders may allege that an investor is misrepresenting the purpose of a loan and not providing all relevant details to get better terms and lower interest rates. Avoid the issue by having a residential real estate attorney ensure everything is disclosed to a lender. 

3. FHA Re-Selling Regulations 

The Federal Housing Administration offers mortgage insurance but has implemented certain regulations on the investments it supports. This limits the number of times a specific property can be bought and sold again. FHA mortgage borrowers must typically wait 90 days before putting a home back on the market. If an investor is unaware of these rules, they may inadvertently violate them by re-selling a house before the designated waiting period has elapsed.  

House flipping may look like a sound investment, but there are several legal complexities to consider. If you want to purchase a property for this purpose, consult with a residential real estate attorney first. The professionals at Greene Law PC will thoroughly analyze the risks associated with the endeavor to ensure you make a sound financial decision. Contact the law firm at (860) 676-1336 to schedule an appointment, or visit them online to learn more about their background and expertise.