90 Day Anti-Flipping Waiver Extended Through 2014
Attention rehabbers and investors: You have been given a an extended window of time to purchase properties using FHA financing and then quick sell through 2014.
FHA has extended a 2010 waiver that allows you to purchase and sell a property before holding title for a minimum of 90 days.
This 90-day minimum was established by FHA in 2003 as a standard policy that was supposed to combat collusion and fraud.
Buyers, lenders and appraisers would collude in the purchase and quick sale of properties at inflated prices with no renovations and inflated appraised values. It was thought that this practice would lead to inflated values and subsequently depressed markets.
An eerily accurate prediction for the coming explosion of the housing bubble in 2007.
What’s The Catch?
The waiver isn’t a complete redaction of the 2003 policy. In fact there are several restrictions that investors need to keep in mind as they pursue purchase and sale opportunities in light of this waiver extension. As per an Inman News article the following restriction accompany the extension:
- All transactions must be arm’s-length, with no identity of interest between the buyer and seller or other participants. Lenders are required to ensure that the seller actually holds title to the property. (In earlier flipping schemes, buy-sell transactions sometimes moved so fast that the seller never acquired legal title.) There should be no “pattern” of previous flips of the property during the 12 months preceding the transaction.
- In cases where the sales price of the resold property is more than 20 percent more than what the seller paid for it, there must be documentation showing the renovations and repairs that justify the markedly higher resale price. A second appraisal may be used to substantiate the increase in value, but the second appraiser must be selected from FHA’s roster. When no significant renovations occur and the price is 20 percent higher than acquisition, the appraiser must provide “appropriate explanation” for the sudden increase.
- Inspections are required of all the key components of the building structure and systems when price jumps exceed 20 percent. The inspection report must be provided to the purchaser before closing. If the inspection reveals structural or “health and safety” defects, repairs must be completed before the closing and a final inspection performed to ensure that the repairs have been made.
If You Want To Invest You Need To Take Advantage of This
If you are a seasoned investor or a first timer, this is a great opportunity for you to ensure profitability. Obviously there are more keys to profitability [3 Surprising Ways to Win in a Down Market] but the FHA has given you an extend period of time where their 90-day minimum policy has been waived. It represents just another way you can be successful in real estate investment in the Middle Tennessee area.