Selling flips to FHA buyers - I learned a big lesson today!

[Dan K.]

I just finished my first flip and learned an important lesson - there are some restrictions for FHA buyers purchasing flips where the investor purchased the property <90 days ago. Sharing this with the BP community in case a few others didn't know this.

I had an accepted offer from an FHA buyer. Everything was smooth and on track, until the buyers mortgage broker heard from underwriting that properties originally purchased within 90 days aren't eligible for FHA loans. FHA loans can work for buyers purchasing properties last purchased 91-180 days ago, but it looks like it requires a second appraisal.

The FHA guideline is below if you are interested.

Lesson learned! I hope sharing this helps others who didn't know this.

Dan

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If a property is re-sold 90 days or fewer following the date of acquisition by the seller, the property is not eligible for a mortgage insured by FHA. FHA defines the 1 seller’s date of acquisition as the date of settlement on the seller’s purchase of that property, and 2 resale date as the date of execution of the sales contract by a buyer intending to finance the property with an FHA-insured loan. This home was sold 2/27<x-apple-data-detectors://0> and PA date of our transaction is 5/14, that is less than 90 days. In turn, this does not meet FHA’s flipping guidelines. Note - as a general rule fha financing should never be allowed, offered, or accepted as a financing option on a home that has been flipped until after 180 days has past since prior purchase. The rules for homes sold 90 - 180 days post previous sale are not much better. 4155.2 4.7.f Second Appraisal Required on Properties Sold Between 91 and 180 Days After Acquisition A lender must obtain a second appraisal by another appraiser if 1 the resale date of a property is between 91 and 180 days following the acquisition of the property by the seller, and 2 the resale price is 100% or more over the price paid by the seller when the property was acquired. FHA reserves the right to revise the resale percentage level at which this second appraisal is required by publishing a notice in the Federal Register. Example: If a property is re-sold for $80,000 within six months of the seller’s acquisition of that property for $40,000, the lender must obtain a second independent appraisal supporting the $80,000 sales price. Even if the lender provides documentation showing the cost and extent of rehabilitation that went into the property resulting in the increased value, the second appraisal is still required. Note: The cost of the second appraisal may not be charged to the borrower. 4155.2 4.7.g Resales Occurring Between 91 Days and 12 Months Following Acquisition FHA reserves the right to require additional documentation from a lender to support the resale value of a property if 1 the resale date is more than 90 days after the date of acquisition by the seller, but before the end of the twelfth month following the date of acquisition, and 2 the resale price is 5% or greater than the lowest sale price of the property during the preceding 12 months. At FHA’s discretion, such documentation may include, but is not limited to, an appraisal from another appraiser.

[Juan Perez]

sorry im really new to all of this and don't what to ask a stupid question but here we go:

so basically if I do a flip I should wait around 6 months to sell it? more accurate I guess 180 days so in my mind im thinking, how long does it take to close the deal? can you begin closing a deal before the 180 days but actually close it just right or after 180 days? 

sorry if this is a dumb question just trying to figure out the options in this