Great news for real estate investors and flippers who were once restricted with the 90 day FHA anti-flipping regulations. Due to the increase in the volume of foreclosures over the past two years, the Department of Housing and Urban Development recently announced that they are waiving the 90 day flipping regulations in 24 CFR §203.37a(b)(2) in order to permit potential buyers greater opportunities to purchase homes and obtain FHA financing. The waiver became effective on February 1, 2010 and will expire on January 31, 2011. This regulation previously restricted the eligibility for end-buyers to obtain mortgages insured by FHA when these properties are re-sold within 90 days following the original acquisition of the property by the seller. This waiver is limited to re-sales that are sold at an arms-length transaction.
There are two caveats to this waiver that you must be aware of. The first caveat is that the waiver is limited to forward mortgages, so it does not apply to Home Equity Conversion Mortgages. The second caveat is when the sales price of the property is 20% or more over and above the seller’s acquisition costs, the waiver will only apply if the new buyer’s lender:
(1) Justifies the increase in value by retaining in the loan file supporting documents and/or a second appraisal verifying that the seller has completed sufficient legitimate renovations, repair and rehabilitation work on the subject property to substantiate the increase, or the appraiser provides appropriate explanation of the increase in property value since the prior transfer of title; AND
(2) Orders a property inspection and provides the inspection report to the purchaser before closing.
A. The lender may charge the borrowers for this inspectio
B. The inspector:
- Does not have to be an FHA-approved or a 203(k) consultant
- Must have no interest in the property or relationship with the seller
- Must not receive compensation from any other party other than the lender
- May not compensate anyone for the referral of the inspection
- May not receive any compensation for referring or recommending contractors to perform any repairs recommended by the inspection.
C. At a minimum the inspection must include:
- The property structure, including the foundation, floor, ceiling, walls and roof;
- The exterior, including siding, doors, windows , appurtenant structures such as decks and balconies, walkways and driveways;
- The roofing, plumbing, electrical, heating and air conditioning systems;
- All interior; and
- All insulation and ventilation systems
So to all of you real estate investors… go ahead and buy these lemons and make a profit by selling lemonade.
In the worst of real estate times, opportunity arises even on the courthouse steps.
