Good news for you Downtown Phoenix home renovators out there.
In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, the Federal Housing Administration (FHA) has extended the FHA 90 day flip rule temporary waiver of the anti-flipping regulations. The extension will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. The extension will continue through December 31, 2012, unless otherwise extended or withdrawn by FHA.
The waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers. (We like responsible renovations here. Flipping can be a little nasty, you know.)
All other terms of the existing waiver remain the same, and these transactions continue to be limited to sales meeting the following conditions:
- All transactions must be arms-length, which means buyer and seller are acting in their own interest in the sales transaction.
- In cases in which the sales price of the property is 20% or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions and documents, like a lender review of property inspection report, the justification for the increase in value.
- The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
- No pattern or history of flipping can have occurred in the previous 12 months.. One investor can’t flip to another investor and then flip to an FHA buyer.
You can read the full FHA 90 day flip guidelines details here.
So whats the big deal? Well, homes that are purchased at a low price and re-sold at a much higher price in such a short time period with little repairs/renovations are sometimes fraudulent. Lenders are afraid of lending on homes that may be inflated or acquired under duress. With the 90 day flip waiver, and extension until December 31, 2012, investors can now accept offers from FHA buyers in the first 90 days.