FHA 90 Day Flipping Rule and Guidelines for FHA Flipping Homes

Posted by Van Purser on Tuesday, July 24th, 2018 at 12:00pm.

With the number of homes that are being flipped; it is important to know and understand the types of loans that will allow for a home to close.  This is important for investors and for those who wish to buy a home that will be flipped.  Conventional loans are not a problem, but FHA can be.

Conventional Loan

When it comes to flipping homes the conventional loan does not have criteria that would be associated with title seasoning.  Although one of the things I do is supply the appraiser with a list of all of the expenses so that they can see what type of improvements have been made to the property.  This is very important.  That way they can look at the improvements and cost and realize that the house should have gone up in value.

FHA Loan

On an FHA loan, the title seasoning is very important.  The rule calls for 90 days of ownership as of the date the deed is recorded.  This means that the date that home was bought has nothing to do with the 90 days of title seasoning.  The date of recording reflects the title being in the flippers name.  In many cases, a flipper may rehab a home in less than 90 days.  If this is the case the flipper cannot sale on an FHA loan. 

Once the title has seasoned for 90 days from the recording date, the flipper is now able to sell the home on an FHA loan.  One of the things that are required is a second appraisal on the property.  The lowest appraisal is the one they rely on.  FHA will not allow the buyer to pay for the second appraisal

Exceptions

  • The home is being purchased by an employer or relocation agency to relocate an employee.

  • The home is being resold by HUD, as part of its REO program for selling foreclosures.

  • The home is being sold by a government agency, a HUD-approved nonprofit agency, a state or federally-chartered financial institution, or a Government-Sponsored Enterprises (GSE) like Fannie Mae.

  • The home being sold was acquired through an inheritance.

  • The property falls within a Presidentially Declared Major Disaster Areas (PDMDA) and has been issued a notice of exception from HUD.

Consequences

  • For the investor taking a contract before title seasoning is fulfilled; will prevent a flipper from closing. 

  • For the buyer, you will waste money on the inspection of the house, and your appraisal will not be useful.  This means you could lose a $1,000 or more.

Van Purser and his wife Jeanne are a licensed Real Estate Brokers in Georgia.  Since1984 they successfully purchased and renovated over 400 homes.  Their expertise is in representing Buyers or Sellers as an advocate; which means always ensuring their best interest.  Additionally, they represented hundreds of clients over the years as an Associate Broker with Metro Brokers, RE/Max and now with his own firm.  He and his wife, Jeanne, have been married since 1977.   Van or Jeanne can be reached at 770-623-3313, or by email at vanpurser@vanpurser.com or jeanne@vanpurser.com

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