2/11/2016 04:00:00 PM
George Lawson
What is the FHA's 90 Day Anti-Flip Rule?
In the 1990s, unscrupulous investors were buying run-down houses, slapping a little paint on the outside and reselling them a few days later (often using fraudulent appraisals) for inflated prices and profits. Their buyers, who had obtained FHA-backed mortgages, often couldn't afford the payments and defaulted.
To combat this, the FHA has enforced a 90-day "no-flip" rule for a number of years now (also called a "seasoning" rule) which prevents a buyer using FHA financing from purchasing a home from an investor unless the investor has owned the property for at least 90 days. The FHA decided not to extend the anti-flipping waiver last year, and it effectively disappeared again on January 1st of 2015.
So, what's the lesson to be learned for real estate investors and buyers?
If you are an investor and want to sell a property before 90 days, you may want to take extra care to review all of the financing terms of any offers you receive. Though an offer might be higher in purchase price, if it's an FHA offer that requires you to wait an extra 30-60 days before you can sell, you may end up netting LESS money because of the increased holding costs while waiting.
For FHA buyers it means you and your agent need to consider when a home was last purchased in your search criteria. The 90-day no flip rule definitely limits the pool of qualified buyers for investor properties, so they may be willing to wait out the 90 days But if an offer similar to yours comes in from any other finance source it will carry quite a bit more weight than yours. And in a seller's market, with multiple offers, this can put you in a very tough bidding situation.
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