Monday, January 3, 2011

The FHA Anti-Flipping Rule Suspension is about to be lifted...what does this mean to buyers and sellers?

Early last year I wrote a blog post about HUD's one-year suspension of the FHA "Anti-Flipping" Rule that began on February 1, 2010. Well, in just a little under a month from now, that suspension is supposed to be lifted...what does this mean? It means that buyers seeking to finance a home with an FHA loan may have issues purchasing property that has been owned by the current seller for less than 90 days.

As you can probably guess, a "Flipped" home is one that someone purchases with the intent to resell it within a short time period for a profit. Also, one thing that many people do not realize, is that the flipping rules for lending can also apply to transfers of title from placing the property in a living trust, adding a family member to title before listing it for sale, etc....not just investors looking to profit from flipping.

The "Anti-Flipping"rule had been that a buyer using an FHA loan can not purchase a flipped home until the title to the home has been held by the current seller for 90 days or more. A couple years ago, HUD excluded bank owned properties from this rule, as there is a change of title from the foreclosed owner to the bank. Often times however, investors who are flipping property do some improvements to the property and list it within days or weeks of taking title to the property....before the Anti-Flipping rule was suspended, it was not uncommon when searching MLS for properties to show a buyer to see an agent-only remark stating something like, "Sorry, no FHA loans until 2/15/2010 due to anti-flipping rule." In fact, in 2008 I wrote a blog post about the anti-flipping rule when one of my buyer clients expressed interest in purchasing a flipped home.

So for nearly the last 11 months, buyers (and sellers of properties meeting the "Flipped" definition) have enjoyed the ability to use FHA financing on properties that meet the definition of a flip...I have not heard anything to support the continuation of this suspension of the "Anti-Flipping" rule. We shall see what happens when this suspension ends on January 31, 2011. If you are an FHA buyer looking for a Sacramento property and are looking at flipped homes, you may want to accelerate your home search.

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