FHA Property Flipping Waiver: An Executive Summary of “Must Knows”

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On Friday January 15, 2010 we posted the FHA’s announcement to suspend their now infamous 90-day anti-flipping rule for 1 year, effective February 1, 2010.

Yes, this is great news for investors trying to flip properties to FHA Buyers!  But after reading carefully through it myself, I see there are also some caveats and important nuances you should absolutely be aware of.

So I created the video above to share with you what I feel are some of the most important and crucial takeaways for real estate investors.  And for those of you who don’t prefer video, I’ve also posted the basic summary below.

IMPORTANT DISCLAIMER: But please be advised that I’m not an attorney nor am I rendering any legal advice.  These are my opinions after having reviewed HUD’s actual 3 page flipping waiver, which I advise you and any savvy investor to do for yourself as well.  You can find a link to it on HUD’s website, and I’ve also linked to it from the blog post on REItips.com

First, exactly why is this such good news for investors?

Because for quite some time now investors’ endeavors to earn an honest profit flipping great houses to qualified FHA buyers have been stymied by the FHA’s “No Flip 90-Day Seasoning Rule”.  This basically has meant that you couldn’t resell to a buyer using an FHA loan until after you’ve been “seasoned” on title for at least 90 days.  In fact, the rule has actually been that you can’t even go to contract until day 91 – which put your closing typically another 30-45 days beyond that at minimum.

So this waiver essentially pushes the pause button on this rule.  For at least the next year, starting Feb 1, 2010, investors won’t have to sit on your laurels waiting for 90 days on title before you can sign a contract to sell that beautifully rehabbed house to an FHA buyer.

In an effort to help stimulate sales, the FHA is essentially recognizing that people can buy properties, substantially rehab them and improve the value of them in less than 90 days.  And also that, “…the 90-day resale restriction often hinders community stabilization and revitalization.”  But only time will tell if they elect to extend this waiver, repeal the rule entirely, or simply go back to the way things were after February 2011.

Crucial Takeaway #1: Seller Must Hold Title

One thing you’ll notice upon reading the waiver yourself is that the “seller” must hold title to the property.  In other words, they may very well expect to see you (the investor/seller) as the owner of record as of the date your contract to sell to the FHA buyer is executed. So you can theoretically close on your purchase Monday, go into contract with your FHA buyer on Tuesday, and hopefully close with them in 30 days.

While this is a vast improvement over 91-140 days, it does NOT appear that you will be able to do back to back, same day closes to an FHA end buyer. (A-B, B-C).  So you can continue counting A-B, B-C simultaneous closings and 1-day transactional funding out in your FHA flips.

Crucial Takeaway #2: You Still Need Short Term Funding

That’s right, realize that to capitalize on this FHA policy change, you should still be prepared to come up with the short term funding you need for acquisition (especially 30-60 day funding) and to hold the property for a period of time.

Said another way, you will still have to buy and fund your deal, then go through the process of selling to the FHA end buyer. But thankfully, it’s a heck of a lot easier to find 30-60 day money than 90-120 day money.

Crucial Takeaway #3: The 20% Rule

Basically the waiver states that if your resale is 20% higher than your acquisition price, you’ll have to pony up some extra proof to an independent appraiser that renovations and repairs justify the higher price. So keep good records during your fixer projects!  You can probably expect to be asked for your receipts, before/after photos and other records as proof of what you have done to enhance the value.

Also, realize that because of the higher scrutiny you’ll likely face in underwriting, you might have a real challenge flipping houses where you just happen to get a smoking deal, and want to sell to an FHA buyer with little or no rehab involved.  This may be a red flag.  But if (for example) buy a property for $200,000, resell it for less than $240,000, you should be fine.

Criucial Takeaway #4: Is There a Flipping Pattern?

Basically the subject property should not display a pattern of previous flipping activity.  While this seems a little subjective, it could mean that if the property has been previously wholesaled in the last 12 months, the FHA may flag it and disapprove.

So you would be wise to check the last year’s title and see if it’ s changed hands much at all – hopefully not at all.

Other Important Points:

  • All transactions must be arm’s length.  In other words, no family member, business colleagues and basically no shenanigans.
  • Assignments of a contract for sale will likely trigger a red flag.  Keep it clean and straightforward on your FHA flips.
  • Entities such as LLCs, corporations, and trust must be properly established and operating in accordance with applicable state and Federal law.  Again, watch the fancy stuff.

The Bottom Line is This:

The FHA “no flip” waiver is great news and will open up many opportunities for investors in 2010.  There’s a lot of money to be made in the FHA buyer arena, and now our nation’s “housing authority” has taken one small step to try to address the illiquidity in the residential real estate market.  No, it’s not a perfect step – but it’s a step nonetheless, and a positive one.

Again, you should read the waiver for yourself, understand what it is and what it isn’t, and how to apply it to your own real estate investing endeavors.

Was this helpful to you?  Please share it with someone!
Questions? Comments?  Please share your thoughts below…


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. 🙂

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FHA flip rule seasoning waiver 2010 | Real Estate Investing Tips Reply

[…] UPDATE: After reading carefully through the 3 page waiver myself, I put together an Executive Summary of “must knows” every investor should be aware of… […]

Mark Reply


As usual great stuff!!! Thanks for making those points of the FHA “guidlines” clear – Pictures and reciepts are a must


Al Reply

On the topic of the 20% rule, I could have sworn that I heard Jeff Watson mention something about 15% being the point where two appraisals are required. Are you deriving 20% from this somehow — or what am I missing?

Hi, Al. The 20% is coming from the waiver itself.


Angela Reply

Thank you for putting everything in “PLAIN” english. I knew i could count on you to see us through this.Fairly new most valued reader.

Gabriel Reply

Thank so much for keeping us (investors)up to the good news.
I do have a lot offers about investing in REO’s from couple realtors that have access to this properties (first hand).

How can capitalize on this? any suggestion “like partnership” I will do the footwork.

Calvin Reply

Thank you that was very interesting anf very good to know.
Sincerely Yours,

Adam Reply

Very informative JP. You keep me updated and that spells success. Keep it up, and God bless!

Kelly Miller Reply

Thank you JP!

Ryan Lawrence Reply

So if the new waiver allows for a person to buy within the 90 day window, as long as no flipping or wholesaler is involved in the past 12 months…so does this eliminate the old rule where FHA will still back a loan if a wholesaler is involved, but you just have to wait the standard 91 days…basically, does the new waiver trump the old code?

Great question, Ryan. And again, I can only give you my personal opinion as to the answer. So please take it only for what it’s worth. But my guess would be if something about the activity of the property were a flag to the latest waiver, then the temporary waiver would simply not apply and you would default back to the “normal” (aka previous) guidelines.

Again, just my opinion here. But that’s what I think. Hope it helps!


Johnny Maykin Reply

If I purchase a HUD home with a FHA 203k loan as owner-occupied, can I still flip it in under 90 days or does this only apply to FHA investment home loans?

I don’t want to ask my lender…My FHA lender has asked a lot of questions to ensure I will be living in the house for 12 months but there will be 90k in profit sitting there after repairs!!

jon rubin Reply

great post! nobody i asked could explain it they just think it’s great, thanks to you I now know alot more than my friends and can tell them to check out yoour blog for more info (i already shared it with facebook) thanks for the help & keep doing what your doing it’s awesome! 🙂 jon

Real Estate Investing Links for February 3, 2010 Reply

[…] “FHA Property Flipping Waiver” […]

Eric in Silicon Valley Reply

JP – thanks for explaining this so well in plain english.I know there’s a lot of articles on this issue out there right now, but this one is my favorite because of the format.
.-= Eric in Silicon Valley´s last blog ..What you need to know about buying a property at a foreclosure auction =-.

walidmrealtor Reply

Good read, I didn’t recall the flipping pattern portion of the rule, I’m glad you touched on it here.

jfarmer73 Reply

This was very helpful. I am in the middle of a sale of an investment property. I purchased as the silent investor with $30,000 cash. Repairs and renovations were done for costs of materials only at around $18,000. It was a complete renovation. The Purchase Contract is for $83,000. The property appraisal came in fine. The buyer’s had an inspection done, and it came back fine.
Here’s where I am most concerned. The property closed with my Cashier’s check, but in a partner’s name. She Quit Claim Deeded it to me a few months later. It has only been 60 days since the Quit Claim to me was recorded. Since the 12 month chain shows two transfers of title, will we have a problem? Thanks.

JP Moses Reply

Interesting question. I don’t know if there’s a definitive answer, as it’ll be up to whoever at FHA reviews your buyer’s application for “red flags” to determine. But my gut feeling is that, if they question the transfer, you can simply explain in writing exactly what the circumstances were and that it wasn’t actually a flip, but more like a deed-in-lieu of foreclosure, then you’ll probably be in good shape. Again, just my opinion.

Good luck with it – if you think about it, stop back by and let me know how it goes!


Tobias Reply

If an investor waits 91 days before acceting an FHA contract, are they limited to a percentage over acquision cost?

GoldenForeclosures Reply

First off, thanks for the great blog and a wealth of reviews and information. Secondly, thanks for this great summary. Which leads me to a third point — does the 20% profit for investors restriction apply only if the “C” buyer is an FHA or otherwise government-financed? What about conventional (bank) financing (mortgage)? And cash buyers? Can Fannie Mae or Freddy Mac place the 20% profit restriction for 90 days onto the title/deed even for cash buyers? That’s what some people on online forums (which are always correct, of course) have said is happening.

JP Moses Reply

Great question – and it only applies when your “C” buyer is FHA. Reason being, FHA can’t control those things if they’re not even involved in the transaction. They don’t police all real estate transactions – just like the 90 day flipping rule this waiver applies to only applied to new FHA backed loans. Make sense?

theebigbang Reply

Can the underwriter requires additional repairs and fixes, beyond that which FHA normally requires, because the home is a 90 flip?

JP Moses Reply

I’ve not heard anything to that effect. So I can’t say for sure, but I seriously doubt it.


Cory Boatright Reply


Your insight and explanation on these issues provide excellent transparency for your readers. Thanks for being a servant bro.

Remember… be a servant,

Cory Boatright
Loss Mitigation Specialist

Wonayemi Reply

This is very helpful to me a great deal. I appreciate your view on this matter. Thanks. walegvs

RyderChadwick Reply

This is very important news, you’ve woken up some of us, now. The FHA really wants to stay in the ring, doesn’t it? You’ve written a very good article, that quite explains what the deal with the situation was and what the repercussions are. It’s nice to read a text that is both objective and transparent. Lately, I’ve stumbled upon many posts that were written for somebody else than the readers and I am glad that somewhere on the Internet someone still knows that we are the ones who read you, and not the advertisers. ____________________Ryder Chadwick

HouseMaster Reply

I don’t think that the current real estate market is very good for investing if you want to resell fast. 30-60 days might not be that easy to go for. I think you need to think long term now if you are going to invest in the real estate market. The fact is that the market is moving very slow now, but it is getting back on its feet.
Real estate Austin TX

wildo Reply

I ‘m new in the investor’s world. I have came across the Hub Infamous 90 flip rule over the internet numerous times in the last week and a half. Your article has opened my eyes to this subject that wasn’t quite clear, that is now transparently keen to understand for a beginner like myself. Though it is a first step for hud due to present real estate market conditions in order to stay in the flow, it must be viewed with caution by investors who move in that direction. Thank you for a well addressed and clear informative insight and your honest opinion on this matter.

philippine real estate Reply

Thanks for sharing those
things to consider. You really gave valuable information here. 

Property Management Reply

This one truly sounds great! As the regarding features about investing are solidly looking just most promising about it. It’s crucially looking one of the most unique featured and knowledgeable post. Thanks for sharing.

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