Since 2010, The Federal Housing Administration (FHA) has had in place a WAIVER of its rule prohibiting the use of FHA financing to purchase a property that was being sold within 90 days of its previous acquisition. This waiver allowed investors who had purchased a home with the intent of remodeling it and reselling within a short period of time to sell the home to a buyer who was using an FHA loan program to purchase the home. Although there were some restrictions on that program, such as mandatory second appraisals, it allowed many buyers to purchase these properties with a low 3.5% down payment under FHA guidelines.
Each year since 2010, the waiver has been extended annually. FHA has recently announced that the rule, which is currently set to expire on December 31, 2014 at 11:59 PM, will NOT be further extended. In order to qualify under the existing waiver, contracts must be fully executed prior to that date/time.
Exceptions to the FHA Anti-Flipping Rule
There will continue to be exceptions allowed for the following entities:
- Sales by HUD (Department of Housing and Urban Development) of properties owned by them (REO).
- Sales by other federal agencies of REO properties.
- Sales of properties by nonprofit organizations that have been approved to purchase and resell HUD REO properties.
Sales by state and federally-chartered financial institutions and government sponsored enterprises (GSEs), such as Fannie Mae and Freddie
Upon announcement by HUD through issuance of a notice, sales of properties in areas designated by the President as federal disaster areas.
More Information on the FHA Anti-Flipping Rule
To learn more about the FHA Anti-Flipping Rule, see our article, Property Flips: Do you need to wait to buy or sell a property that was recently purchased?