Working with many Investors, we have been prevented from flipping homes in less than 90days due to FHA regulations which prohibited insuring a mortgage on a home owned by the seller in this timeframe. The result of this was Investor who may had finished remodeling in less than 30 days, although could list a property, could not take a contract where the Buyer was financing with an FHA loan, until after the 90days.
However this regulation was waived last year, and has now been extended through 2011. This is great news as it will allow home buyers to buy remodeled, move in ready homes which should be easier to finance. It will also encourage Investors to buy these homes, moving foreclosures off the market, and developing neighborhood financial growth,
Here is an article from US Development of Housing and Development.
“ In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Federal Housing Administration (FHA) Commissioner David H. Stevens has extended FHA’s temporary waiver of the agency’s ‘anti-flipping rule.’ The extension announced today is intended to accelerate the resale of foreclosed upon homes in neighborhoods struggling to overcome possible property abandonment and blight.
… This action will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
“As I noted when we first announced this policy change early last year, because of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Stevens. “Today I can report that this policy change has been effective. Since the original waiver went into effect on last February, FHA has insured more than 21,000 mortgages worth over $3.6 billion on properties resold within 90 days of acquisition.”
FHA research finds that in today’s market, acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. …..
The extension announced today is effective through December 31, 2011, unless otherwise extended or withdrawn by FHA. All other terms of the waiver will remain the same, and HUD continues to invite public comment on it. The waiver contains strict conditions and guidelines to assure that predatory practices are not allowed.
To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver continues to be limited to those sales meeting the following general conditions:
• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions. “
Further information http://www.hud.gov/offices/hsg/sfh/currentwaiver.pdf