The Federal Housing Administration (FHA) has extended its temporary “anti-flipping” waiver an additional 2 years. It will expire unless extended on December 31, 2014.
This is good news for Investors since they can purchase and renovate foreclosed and abandoned homes and resell the updated properties within 90 days. Before the waiver FHA has imposed the 90 day standard to rein in rampant quick-flips of homes were investors made minimal or no improvements.
The Dept. of Housing and Urban Development (HUD) announced Friday it is instituting a one-year moratorium on the Federal Housing Administration (FHA) 90-day anti-flipping rule.
With certain exceptions, such as HUD-owned and bank-owned properties, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. However, beginning Feb. 1, buyers may use FHA-insured financing to purchase properties resold through private developers and investors, providing access to a broader array of recently foreclosed properties.
Under the temporary waiver, all transactions must be arm’s-length, and most properties will require additional documentation of improvements and justification of the price increase. Additional documentation may include a second appraisal and a property inspection ordered by the lender.
C.A.R. recently submitted a letter to FHA Commissioner David Stevens detailing the challenges facing many home buyers using FHA loans, such as the lack of housing inventory available to FHA buyers, and the need for this rule to be revised to reflect current market conditions. The reexamination of the 90-day anti-flipping rule was passed as an action item during C.A.R.’s board of directors meetings in October.
If you are looking to purchase an investor flip home proceed with caution and be sure to understand fully what was done to the home. Some investors put a quick coat of paint and cheap improvements leaving serious deferred maintenance hidden from view. It’s a good idea to find out if the Investor has done multiple flips and what their reputation is for quality work.
It’s critical to hire a professional home inspector to determine the present condition of the home.