Changes in the FHA Anti-flipping rules

The Federal Housing Administration suspended for one year a regulation that restricted Real Estate flippers from flipping properties in under 90 days and still have that property eligible for FHA financing in February.   The change in this rule will hopefully assist investment in hard hit neighborhoods with the foreclosure crisis and increase in Bank Owned properties.    This will enable investors to reduce the carrying costs of homes and turn vacant unappealing homes into homes that are attractive to first time home buyers.   Often first time home buyers are not in a position after purchase to make improvements and these investors fill a void in the market for such buyers.

Read Also:  Flipping a property? Be prepared to hold at least 90 days!

Changes in the FHA Rules

• The 20 percent rule. If your resale is higher than 20 percent of your acquisition price, you’ll have to pony up some extra proof that the price was justified. “If you buy a house for $100,000 and try to sell it for $125,000, the house is subject to additional underwriting guidelines.

• Title hold. Since a seller must hold property, that still means no simultaneous closings.

• Short-term funding. Investors still need to come up with short-term funding of the 30- to 60-day variety if they want to buy, fund and then sell to an FHA end-buyer.

• Previous flips. Basically, the subject property should not display a pattern of prior flipping activity.  If the property has been wholesaled in the last 12 months, the FHA may flag the deal and disapprove.

Thinking of investing in WNY? Interested in finding out the current market value of your single family home, condo or investment property? Then call Colleen Kulikowski at (716) 650-0051 to discuss what is happening in today’s Western New York Real Estate Market.  We would be happy to give you a personalized Comparative Market Analysis for your home or assist you to purchase a home.   View additional WNY Market Area Statistics here.