Thursday, October 23rd, 2014

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FHA No Flipping Rule Waived (Again)

FHA Flipping RuleIf you like good news and happiness, check this out…

So back in January 2010 we reported (and rejoiced) that the FHA had decided to suspend the 90-day anti-flipping rule for 1 year.

The now-infamous rule was originally intended to prevent shady speculators from defrauding the government, but it also stifled the purchase and renovation of foreclosed homes by legitimate investors like you and me.  Yep, dumber than a bag of hammers.

But the 90 day flip rule waiver in January 2010 effectively enabled qualified buyers to once again get FHA mortgages on properties that were acquired by rehabbers less than 90 days before. Great for them, great for us, great for the economy – thanks for the bone FHA.

And now, in an effort to keep up the momentum gained by the housing market, they’ve just decided to extend “anti-flipping rules” suspension for at least another year to increase FHA lending.

Yay for Sound Logic and Good Reason!

Yep, this is (again) great news for investors trying to flip properties to FHA Buyers. But (again) keep in mind the same caveats and important nuances apply…and you really need to be aware of them if you aren’t already…

  • The seller must hold title (no back-to-back, same day closings)
  • You still need short-term funding
  • The 20% Rule still applies
  • The property still can’t demonstrate a “Flipping Pattern”

If you want to read the original waiver from HUD, here it is.  Or for a rather exceptional ;-) executive summary of these must-knows, you can read this FHA property flipping waiver post I put together with the first waiver.

So 2 Questions…

It’s nice to finally have something nice to say again about the FHA, isnt’ it?

My question to you is…

  1. How much or how little effect do you think this will have on the real estate market and/or economy?
  2. Also, how will/won’t this decision effect you personally?

Please post your comments below…

…jp

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About 

JP Moses is a roughly-hewn man-child who first got into REI after reading Rich Dad, Poor Dad back in Y2K and went full time in 2002. He's tinkered in everything from landlording to short sales to rehabs to Realtoring to REOs to notes to owner financing, blah, blah, blah...Till he finally stuck his flag deep into wholesaling and has since flipped somewhere north of a couple hundred deals.

JP's not a “guru” but also doesn't think it's a bad word. Among his core values are authenticity, creativity, big honkin' value, general fun-ness and being unshaven. He's super proud to be chief blogger guy at REItips.com and host of the free REIology podcast. He also thoroughly enjoys sharing his 53 best real estate investing forms with anyone who wants them. You should totally check that out. :-)

  • Carl Medley

    Doesn’t help unless the lending institution has their investors approve and adopt the policy. Easiest way around it is to properly adapt a trust into your deal structure. Take Care.

  • http://www.cashokc.com Dave

    I still think the best way to sell these properties, even when I rehab them, is with owner financing. Yes, a quick 15-25% cash out is nice, but I guess it depends on your investment strategy. I’ve always made better money by cashflowing the property on a CFD, then cashing it out later. I always get the price I want and I don’t have to pay a Realtor commission. And, I don’t have to deal with the “iffy” banks and their anti flipping rules.

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  • John

    This hasn’t been officially announced yet. As of now its still speculation…

  • http://www.realnettampabay.com Jennifer

    Personally, I’m more into buying them and renting them out.

  • http://www.coastalrealtyfla.com Lesley

    I’ve never been a fan of flipping, mostly because the people

  • Lesley

    whoops, sent too soon. I meant that mostly because the people I know who did the flipping didn’t put the highest quality effort into redoing the home. I think the term “flipping” has been getting a bad reputation.

  • http://www.megamastery.com Jeffry Evans

    That is fantastic news for flippers and buyers. Many people need to use FHA due to the 3% down payment rule and other reasons, and not being held up by ridiculous government regulation is a great thing, just as you said.

  • http://www.megamastery.com Jeffry Evans

    BTW JP – you should look at taking away the mybloglog tracking stuff from this site, it severely holds up the loading of the page, and I think mybloglog has been shut down, or is going to be soon. Just a thought.

  • http://REItips.com/ jp moses

    Hey, thanks for the heads-up, Jeffry. I didn’t think I had My Blog Log still active anywhere…I don’t see it…but when I look at the source code there’s still something left from it. I’ll look into it and see if I can get rid of it. Thanks!

    …jp

  • Anonymous

    Flipping can go either way – sometimes people don’t do enough to ensure the long term sustainability of the remodeling.

  • Investmentpropertyinc

    Hello Carl , thanks for the tip about the trust.. Would love to hear more about setting one of those up .. And If I could use the trust more than once; if I change the name but use the same format.. Please help all feedback is appreciated, thanks