In many hot markets throughout the country, developers are taking significant steps to discourage flippers from investing in their projects.
From a developers perspective, these actions make good economic sense particularly in limiting downside potential as the developer is ultimately taking the majority of the risk in building a project. Without limitations, developers run the risk of having too many resales that compete with their own incremental phases of a project. Additionally, speculators with a limited amount of capital tied-up in a new construction project are far more likely to walk away in a downturn.
In our local market, particularly at some of the higher-end projects with proven developers, recent changes that we are seeing include higher down payments, no contract assignment clauses, and penalties payable to the developer for a resale within a year.
Speculators beware [Orlando Sentinel]
Flippers: Riding the tide [Philadelphia Inquirer]