Resale of property within 90 of prior transfer - FHA Financing - Property Flipping

By
Real Estate Mortgage Broker with Alpine Mortgage Planning

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.

 

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Comments 17 New Comment

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Rainer
32,618
Scott Hoag
Preferred Lender / Mortgage Company
Caliber Home Loans, Inc

Thank you for the excellent info.  I found that after I pulled an FHA case number on day 20 after acquisition by the seller that FHA won't do a loan on the home for 180 days.  the My Community program from conventional loans will work with some lenders, but require a 5% down payment.

Is it OK to quote some of you info here with a link back to you?

August 14, 2008 03:40 AM
Rainer
35,053
Paul Bozek
Alpine Mortgage Planning

Scott, feel free to quote the info.  I don't have a problem with it whatsoever.

August 15, 2008 12:40 PM
Rainer
10,782
Scott Hendrix
Realtor, Historic Home Specialist
Century 21 Select Properties

I recently had this happen to me.  My FHA buyer and I went through a three month process trying to get one to close.  Part of this was due to the owners (bank owned) not replying for long periods of time and inspections and appraisals.  What kills me is that, in the price range we had to stay in, it was very hard to find a house that was liveable, much less one that could go FHA.  Once we finally, barely got an appraiser to give the green light, guess what??  We were told the 90-day rule applied and we were out of the game, and my client out some money.  Now, this is a house that I would move into, with some cleaning of course.  It was structurally sound and had some chipped paint, but it was like pulling teeth for FHA to look at it.  It seems that it is so hard to find people homes in the lower price range and get them a loan--knowing good and well they would make the home beautiful and wouldn't die from chipped paint!  I know some rules have changed, thank goodness, but why does it have to be so hard for everyone?!

August 15, 2008 12:55 PM
Anonymous #16
Anonymous
Bob

I flipped two homes in 2009 and both buyers were getting conventional mortages, I was told by their mortgage companies I had to wait 90 days for resale. So I am a little confused, is it only FHA mortages that have to wait 90 days or all mortages?

Bob

February 17, 2010 05:37 PM
Rainer
35,053
Paul Bozek
Alpine Mortgage Planning

Bob,

Conventional guidelines don't have a flip rule.  If you have a high markup from your purchase price, then the lender might require a wait period, 2 appraisals or receipts to justify the increase in sales price.  FHA to my knowledge was the only one that required a 90 day hold period.  Investors like conventional buyers with 20% down because there is no or very little red tape.  You might have had a conventional buyer at 95 or 90% ltv at which point a mortgage insurance company is involved and they require an addtional approval on top of the lender approval. 

Bob, contact me directly as I have a GREAT way to reduce your risk with your flips and get your properties flipped quicker. 

Hope this helps!

February 17, 2010 06:16 PM
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Paul Bozek

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