In timely fashion (7 days to expiring), HUD has extended their 90 day flip waiver through December 31, 2012.
What’s The Big Hairy Deal?
Prior to February 1, 2010, HUD/FHA did not allow a home buyer to use an FHA loan when buying a home from an investor who bought a home, did repairs/renovations, and listed it for sale with-in 90 days of the original acquisition date. Buyers using an FHA loan had to wait until the 91st day to write an offer on a home from an investor who was ‘flipping’ it.
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.
Because there are fewer buyers in today’s market who use conventional financing (think 20% down required), most buyers are using FHA in Riverside and San Bernardino County. More buyers means more offers, which means more competition, which increases demand, which helps prevent homes from selling for less. Investors like this as well because they no longer have to wait 90 days before accepting an offer.
Remember, the investors goal is to sell that homes as quickly as possibly, and for as much as possible, so this will help move home investor more quickly and stabilize home prices.
Have The FHA 90 Flip Waiver Guidelines Changed In 2012?
No, but here is a summary of the hoops HUD/FHA make the seller and buyer jump through to assure the sales price is legitimate and no fraud is involved:
- All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
- 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.
- 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 (like two appraisals and buyer can only pay for one and lender review of property inspection report).
- The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.
You can read the full FHA 90 day flip guidelines details here.
Why Would I Buy A Home From An Investor Who Is Flipping the Home?
If you are buying a home in Southern California, more specifically in Riverside or San Bernardino County, there is a good chance many of the homes you are looking at are investor ‘flip’ transactions. Investor flip homes often undergo some very nice renovations that a bank owned or short sale property will not have. The other options are waiting 2-4 months on a short sale home or competing for a bank owned / REO home.
There just aren’t a whole lot of regular/standard sales out there.
Many Lenders Don’t Offer 90 Day Flip Waiver Financing.
You would be surprised at how few lenders actually offer financing for FHA buyers on less than 90 day flip transactions. And many who do, don’t allow the seller to have more than 20% markup in sales price. Fortunately, we do provide financing on 90 day flips for all buyers, not just FHA buyers.
If you want or need an FHA loan pre-approval that also covers 90 day investor flip situations, call (951) 215-6119 or email me.