| Flipping is a word that can cause many a lender | | | | additional documentation validating the property's value. |
| anxiety. Not the traditional flip that you see in | | | | FHA also has flexibility to examine and require |
| gymnastics or diving. But flipping as it pertains to the | | | | additional evidence of appraised value when properties |
| real estate and lending community. The flipping I'm | | | | are re-sold within 12 months. |
| talking about means buying a home for a bargain and | | | | How can this policy affect you? If you are selling or |
| then re-selling it quickly for profit. Sometimes huge | | | | buying a home that is a flip and you want FHA |
| upgrades are made to the property, sometimes not so | | | | financing available, don't even think about executing a |
| much. But anytime someone is in the market to make | | | | contract until the 91st day. Your appraiser will note that |
| money turning houses, opportunity for fraud can arise. | | | | it hasn't been 90 days since the last sale, and |
| That's why lenders are particular and have so many | | | | immediately your FHA underwriter will read it and, in |
| rules attached to flipped homes. | | | | turn, reject the loan. And if on the 91st day since |
| Not too many years back, certain markets became | | | | settlement you are buying a home that was in |
| inundated with fraud flipping schemes. Realtors, lenders | | | | deplorable condition and has been fixed up nicely, you |
| and appraisers in these situations were all in cahoots | | | | might need to get a second independent appraisal to |
| with one another. As the saying goes, one bad apple | | | | support the value. Even if it is really apparent that it's |
| can spoil the whole bunch. It was a very terrible thing, | | | | not the same house it was 3 months ago. |
| and the regulations we have today are reflective from | | | | Certain properties are exempt from the rule. For |
| that lesson learned. In particular, FHA has established | | | | instance, if HUD has foreclosed on the property, it's not |
| strict guidelines to follow to alleviate flipping fraud on its | | | | going to make itself wait 90 days to sell its own real |
| homes that it insures. | | | | estate. That would be kind of silly. Also, if one can |
| FHA released a 90 day flipping waiver policy in | | | | show the seller inherited the property, it should be ok. |
| reaction to the current market and buying climate. | | | | And properties acquired by employers or relocation |
| Basically, it outlines the following: FHA requires that: a) | | | | companies are kosher, too. There are a few other |
| only owners of record may sell properties that will be | | | | exemptions sprinkled about, but these are the most |
| financed using FHA-insured mortgages; b) any resale | | | | common ones encountered. |
| of a property may not occur 90 or fewer days from | | | | Basically, if you're in the home for an FHA mortgage, |
| the last sale to be eligible for FHA financing; and c) that | | | | just keep your ears and eyes open. Knowing your |
| for re-sales that occur between 91 and 180 days | | | | limitations upfront can make you a better negotiator |
| where the new sales price exceeds the previous | | | | and save you headaches. |
| sales price by 100 percent or more, FHA will require | | | | |