For anyone who has bought a home with the intention of flipping for profit…. or would-be FHA home buyer that has fallen in love with a property that is being flipped by an investor, you know well that the FHA anti-flipping rule has caused some grief for you.
Up until now, if you were a buyer, that was obtaining FHA financing to purchase a home, you wouldn’t be able to make an offer on a property that was being sold by an investor (flipper), unless that investor had owned the property for at least 90 days.
If you were that investor that recently acquired a property, and turned around to list it for sale, you only had two types of buyers that you could market to: Conventional financed buyers and cash buyers.
Unfortunately, most property flipping happens within the price range of the FHA home buyer, and with FHA accounting for more than 60% of financing transactions in many markets, there was headaches for both sides.
This has changed.
For all purchase contracts dated after February 1st, 2010, FHA has waived the flipping rule. Private Sellers and Investors can now sell their properties to FHA buyers without having to wait 90 days. There are a few rules to keep in mind, but believe me, these are fair and this is good news.
- The transaction must be Arms-Length. There cannot be an identity of interest between the buyer, seller, or any other parties participating in the transaction.
- In cases where the sales price is 20% or greater than the seller’s acquisition, the lender must justify the increase in value with supporting documentation of renovation, repair and rehabilitation work.
- If no such work was performed the appraiser must provide an appropriate explanation of the increase in property value since the prior title transfer.
- The lender must order a property inspection and provide that report to the home buyer. Buyer’s may be charged for the cost of this inspection.
This is brand new and developing, so we wanted to make sure that you got the good news before you started your weekend. If you have any questions regarding this, or anything else, please feel free to contact me.