I had a few people ask me about having difficulties financing REO properties that have transferred within the last 90 days of ownership. I have taken excerpts from the handbook to help clarify. As always, feel free to contact me with any questions you might have!
Resales Occurring 90 Days or Less Following Acquisition
If the owner sells a property within 90 days after the date of acquisition, that property is not eligible security for a mortgage insured by FHA unless it falls within one of the exceptions to the time restrictions on resales set forth in §203.37a(c) of the regulations. FHA defines the seller's date of acquisition as the date of settlement on the seller's purchase of that property. The resale date is the date of execution of the sales contract by the buyer that will result in a mortgage to be insured by FHA.
Exceptions to 90-day Restriction
The following sales are exempt from the time restrictions provided by §203.37a:
· Sales by HUD of its Real Estate Owned
· Sales by other United States Government agencies of single family properties pursuant to programs operated by these agencies.
· Sales of properties by nonprofits approved to purchase HUD-owned single-family properties at a discount with resale restrictions.
· Sales of properties that are acquired by the sellers by inheritance.
· Sales of properties purchased by employers or relocation agencies in connection with relocations of employees.
· Sales of properties by state and federally charted financial institutions and Government Sponsored Enterprises.
· Sales of properties by local and state government agencies.
• Upon FHA's announcement of eligibility in a notice (i.e., ML), sales of properties located in areas designated by the President as federal disaster areas, will be exempt from the restrictions of the property-flipping rule. The notice will specify how long the exception will be in effect and the specific disaster area affected.