Property flippers and Real Estate agents who represent flippers have something to celebrate. FHA has extended the temporary property flipping waiver announced in 2010 to December 31, 2012. The temporary waiver removes the restriction that prohibits FHA financing of properties being sold within 90 days of seller acquisition. Under FHA’s temporary guidance, all sellers and properties meeting the following requirements are exempt from FHA’s current property flipping restrictions:

• The purchase transaction must be arms-length with no identity of interest between borrower and seller or any other parties participating in the transaction (Note: FHA defines “identity of interest” as “a sales transaction between parties with family relationships or business relationships.”) If the sales price is 20 percent or more higher than the seller’s acquisition cost, the property flipping waiver applies only if the lender obtains the following documentation:
• Evidence the seller has completed sufficient legitimate renovation, repair, and rehabilitation work to substantiate the increase in value (contracts and paid receipts and/or a second appraisal indicating repairs completed and the value of those repairs) – If no or minimal repairs were completed, the appraiser must indicate the reason for increase in value since seller acquisition, and
• Copy of a property inspection completed by an inspect or having neither an interest in the property or a relationship with the seller. The inspection must include all of the following elements:
• Property structure, including foundation, floor, ceiling, walls and roof
• Exterior, including siding, doors, windows, appurtenant structures such as decks and balconies, walkways and driveways
• Inspection of roofing, plumbing, electrical, heating and air conditioning systems
• Interior inspection
• Inspection of insulation, ventilation systems, fireplaces and solid-fuel-burning appliances such as wood stoves
• Only the following sellers are exempt from the inspection requirement above and second appraisal requirement:
• Seller is a relocation company or employer who acquired the subject property as the result of an employee transfer.
• Seller is any one of the following: HUD, VA, GNMA, FNMA, FHLMC
• Seller is a non-profit approved to purchase and sell HUD-owned properties with re-sale restrictions
• Seller is a lender or property disposition firm hired by or affiliated with a lender who acquired the property through foreclosure
• Seller is a non-profit agency who acquired an abandoned or foreclosed property using a Neighborhood Stabilization Plan (NSP) grant
• Seller recently inherited the property
• Seller is a state or federally chartered financial institution
• Seller is a local or state government agency
• Seller recently transferred property to his own revocable living trust, often referred to as a “family trust” or “inter-vivos trust”

Anti-flipping rule affected sellers of renovated foreclosures in a way that they were less likely to take an offer from an FHA buyer because they would have to wait the 90 days, covering the carrying costs and risking vandalism and other problems arising from vacancy.  Many of today’s homes are bought with FHA financing and by waiving the 90 day flip rule this drastically reduces the bottleneck to getting homes sold in neighborhoods submerged with foreclosures.

 

 

Tweet