The property flip rule is an FHA guideline that basically says that they will not lend money on a home that has been purchased less than 90 days ago and then resold for a significant profit.
This rule used to state that under no circumstances can a home buyer use an FHA loan if the seller of the home purchased it within the last 90 days.
This rule was changed earlier this year to now allow a home buyer to use an FHA loan if the property meets certain requirements.
The 3 things you MUST know
1. The sales price may not be more than 120% of the purchase price when the seller bought the home. The exception to this rule is if the seller can produce receipts for the improvements that justify the higher price, then you can use FHA financing if the current owner has owned this home for less than 90 days.
2. The 90 days start on the acquisition date of the Trustees Deed Upon Sale.
This means the day the investor purchased the property at auction which is on the deed. For example, if the date on the deed states that it was sold at $XXX,XXX on 7/2/2010, but signed on 7/16/2010 and recorded on 7/23/2010 – The 90 days starts ticking on 7/2/2010.
3. There are many more foreclosures on the market right now, and many more to come. This means more investors coming in to scoop up, and fix up these homes for resale.
Being aware of the rules and time lines for these investor owned homes will save you time and money while searching for your new home.
If you have any questions about how to find out if the home you are interested in is a “flip” property you can ask your real estate agent or lender and they should be able to pull up the public records on the property.