FHA – Change to the Flip Rule

A quick heads up regarding a change with all FHA loans effective January 1, 2015………(don’t shoot the messenger).

  • Anyone working with a seller that acquired a property less than 90 days ago and is “flipping” it to a new buyer using an FHA loan
  • or any buyer negotiating a purchase of a home from a seller who acquired the property less than 90 days ago and wants to use their FHA loan to buy

We don’t see this come up much anymore, but it does still happen from time to time…………

FHA FLIPS – PROPERTIES BEING RESOLD WITHIN 90 DAYS OF PREVIOUS ACQUISITION.

Expiration of the Federal Housing Administration’s Property Flipping

Temporary Waiver: FHA’s guidelines state properties resold within 90 days of the prior sale date are not eligible for FHA financing. FHA issued a “temporary waiver” to this ruling in February of 2010. FHA announced that the temporary waiver of FHA’s regulation that prohibits the use of FHA financing to purchase single family properties that are being resold within 90 days of the previous acquisition expires on December 31, 2014 and will not be extended.

What does this mean to you and your clients? Any FHA Purchase contract fully executed after 11:59 p.m. December 31, 2014 will require that at least 90 calendar days has passed since the last recorded sale of the subject property in order to be eligible for FHA financing.

What does “Fully Executed” mean? FHA deems a sales contract to be fully executed when all parties to the contract have signed the contract and the contract is enforceable under the law of the state the property is located in.

What to look for? When you receive an FHA transaction you will want to review the chain of title on your title report and look for the prior transactions. Look to see when the current seller acquired the property and do the math! Example:  Seller acquired the subject property on October 14th, 2014. If your new purchase contract is fully executed on or prior to January 12, 2015 your transaction would not be eligible for FHA financing. If your purchase contract was fully executed on or after January 13, 2014 your transaction would be eligible for FHA financing.

Please be mindful, once a contract is fully executed there is “no going back”.