FHA Amends Anti-Flipping Rule

On January 15, 2010, FHA made some changes to the June 7, 2006 anti-flipping policy on property flipping.

For the past 3 1/2 years HUD has not allowed the resale of a property within 90 days due to flipping concerns.  While the initial intent was to prevent the rapid escalation of the price of homes through questionable flipping of properties, it is now hindering the sale of homes since prices have fallen and more properties are the subject of foreclosure.

While there were several exemptions to the rule, almost all applied to Banks and Financial companies.  This change will directly impact the small investor who buys properties cheaply and repairs them for resale.

Currently many HUD or Lender Repo's are sold "As Is" without warranties or repairs.  Many of the foreclosed  homes are purchased by investors who have the means to repair the homes but may not purchase the homes due to the 90 day holding requirement to sell to a new FHA Buyer and the cost and risks associated.  These buyers have to account for the longer holding time and potential risk of vandalism.  Thus the homes tend to sit vacant longer and hinders community stabilization and revitalization.

Beginning February 1, 2010, sellers that meet the new requirements may be able to sell the property prior the old 90 day rule.  The sales must be an arms length transaction.  The seller must hold title to the property (i.e. no double closing).  There must not be prior evidence of flipping on the property and special rules apply if the increase from the sellers purchase price the buyers purchase price is greater than 20%.

This is a positive change from HUD.  Homes may stay vacant less and buyers have more options.  These transactions will be under more scrutiny but they can now get completed.

The full guidelines of the new FHA Anti-Flipping Rule is available though the link.