Friday, January 2, 2015

90-Day Rule for Flips

The FHA has had a rule for some time that at least 90 days of ownership are required until a homeowner may re-sell his residential property. That waiver of that rule expires today. It may be renewed, but until it is, investors who are flipping properties should be aware of the requirements.

They are as follows:
4155.2 4.7.e Restriction on ReSales Occurring 90 Days or Less After Acquisition
If a property is re-sold 90 days or fewer following the date of acquisition by the seller, the property is not eligible for a mortgage insured by FHA.

FHA defines the
  • seller's date of acquisition as the date of settlement on the seller's purchase of that property, and
  • resale date as the date of execution of the sales contract by a buyer intending to finance the property with an FHA-insured loan.

4155.2 4.7.h Exceptions to the 90-day Restriction
The only exceptions to the 90-day resale restriction described in HUD 4155.2 4.7.e are for
  • properties acquired by an employer or relocation agency in connection with the relocation of an employee
  • resales by HUD under its Real Estate Owned (REO) program
  • sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies
  • sales of properties by nonprofits approved to purchase HUD-owned single family properties at a discount with resale restrictions
  • sales of properties that are acquired by the seller by inheritance
  • sales of properties by state and federally-chartered financial institutions and government sponsored enterprises
  • sales of properties by local and state government agencies, and

  • sales of properties within Presidentially Declared Disaster Areas.
Investors doing fix and flip properties should be sure to notify a buyer's lender of the dates of homeownership, so as not to run into problems with this 90-day rule.

Happy New Year!

Happy Investing!

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