90 Day Flipping Policy

• Per FHA guidelines –
  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
    • The seller hold title to the property
    • LLC’s, corporations, or trusts that are serving as sellers were established and are operated in accordance with applicable state and federal laws
    • No pattern of previous flipping activity exists for the subject property, as evidenced by multiple title transfers within a 12-month time frame (chain of title information for the subject property can be found in the appraisal report);
    • The property was marketed openly and fairly, via, MLS, auction, for Sale by Owner offering, or developer marketing (any sales contracts that refer to an “assignment of contract of sale.” Which represents a special arrangement between seller and buyer may be a red flag).
  • In cases in which the sales price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets specific conditions.
    • Justifies the increase in value by retaining in the loan file supporting documentation and/or a second appraisal which verifies that the seller has completed sufficient legitimate renovation, repair, and rehabilitation work on the subject property to substantiate the increase in value or, in cases where no such work is performed the appraiser provides appropriate explanation of the increase in property value since the prior title transfer; and
    • Orders a property inspection and provides the inspection report to the purchaser before closing. The lender may charge the borrower for this inspection. The use of FHA-approved inspectors or 203(k) consultants is not required. The inspector must have no interest in the property or relationship with the seller, and must not receive compensation for the inspection from any party other than lender. Also, the inspector may not compensate anyone for the referral of the inspection. …… Please see link for additional guidelines. http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf
  • The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

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