Problems with FHA 90 day flip rule


#1

Hello,
Have people been having problems with the 90 day flip rule when the resale price is over 20%? It seems on the surface the waiver of the flip rule solve issues with resales, however, the HUD language is clear that if you are resaling above 20% a second appraisal and receipts and photos that document the substantial improvement to justify the price increase are needed. It seems it should likely cause an issue on every transaction to an FHA buyer then because if you buy at let’s say $200k, you are limited on resale to $240k which is not much profit at all if you factor in cash for keys/eviction, real estate commission, etc. On the resales that I have done so far (all being for above 20% of purchase price bought) I’ve either resold to conventional buyers, had to wait the 90 days because of other reasons, and in one case did it within 90 days to an FHA buyer without having to submit anything (so maybe it’s not really an issue?). The reason I am extra curious about this now is that there is a purchase opportunity with minimal rehab that I already have an end FHA buyer in mind for and having to wait the 90 days would make me have to reduce my highest offer I can buy the property for to compensate. Thanks in advance for any help.


#2

Have not had any problems with this. It is actually the best problem you can have. Just recently purchased home home in San Ramon for $214,500 put it on MLS about a month later for $299,000 had several offers took what I hope was the strongest buyer. Lender required two appraisals so far so good. I had a lot of good comps to give.
I’m a foreclosure buyer I have many all cash clients, call and talk to me lets see how we can help you. www.ContraCostaProperty.net
or call me 925-766-7713 after 2pm Have a great day


#3

FHA still has the 90 day flip rule. Also, some lenders still require 2 appraisals on regular sales.


#4

Thanks for your help Kevin and Mike. Isn’t the FHA 90 day flip rule waived until December 2012 Mike? Hopefully it will be two appraisals with the value coming in high enough for both of them and it’ll be done with, but hope they don’t ask me to detail every improvement I made in the place and have some kind of safeguard stopping me from reselling a place I don’t greatly fix up that much but still profit.


#5

The FHA 90 day flip rule waiver has been extended to 12/31/2012. I am facinated by how everyone I talk to equates the 20% limitation to profit. I think the original intent of the rule to was reduce the churning in the market that resulted in rapid price escalations. Of course this is not happening now, at least yet. The waiver states that if the lender can determine that the increase in value is justified by the seller’s improvments, then it is OK. A 2nd appraisal is an option if the change in value is not justified by the improvments. So far in practice, most of the lenders seem to have overlays that make the 2nd mandatory.


#6

Thanks for your reply Richard. It’s clear to me now that you can still resell for more than 20% even if the increase in value is not completely justified by improvments…just need a 2nd appraisal verifying the higher value. Thank you.


#7

We are in escrow on a less than 90 flip with an FHA buyer. Even though we can clearly show improvments and less than 20% profit, Wells Fargo required a 2nd appraisal. Both appraisals came in at the sales price, so the deal is chugging along.


#8

Around here, many pros will not accept an offer if the buyer insists on using WF. I did close a deal w. them a year ago. 2 appraisals but, I think, was till within the 90 days. Can’t recall what profit I showed.