Flipping is BACK

As many of you have heard by now, FHA has temporarily lifted the restriction for financing properties being resold within the first 90 days of ownership.

The following is a summary of the guidelines which are eligible on transactions if the Seller is owner-of-record 90 days or less, effective with fully executed purchase contracts dated between February 1, 2010 thru February 1, 2011 (one year).

1. The sales price of the property cannot exceed 20% of the amount the seller paid for the property – . FHA has announced this guideline however, they will consider exceptions to this rule based on specific criteria provided by the lender. Some banks (Wells, for one) are working on this with FHA and will hopefully announce in the near future how the exception process will work.

2.The contract of sale for the purchase of the property is fully exectued and dated between Feb. 1, 2010 and Feb. 1, 2011

3. The transaction is “arm’s length”, with no interest between the buyer and seller or other parties participating in the sales transaction. Public records must show the seller listed in the purchase contract is on title.

4. There is no pattern of previous “flipping” activity for the subject property, as evidenced by multiple title transfers within past 12 months.

5. The property was openly and fairly marketed- via MLS, auction, For Sale by Owner or developer marketing. NOT allowed: a sales contract that refers to an “assignment of contract of sale” (which represents a special arrangement between seller and buyer).

6. The appraiser must: Comment on any improvements to the subject property made by seller w/ supported photos, acknowledge the increase in sales price from the previous sale AND provide specific comments on support for an increase in value, provide listing and sales history of the subject property

7. The fully executed purchase contract can NOT be re-dated

8. The buyer’s Realtor can NOT be the seller and the buyer’s agent can NOT be employed by, related or affiliated with the seller

If you want a copy of the “waiver” agreement for FHA, email me or go to HUD’s website.


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