FHA Lifts its Anti-Flip Policy
Many of the homes that are currently on the market in Arizona are recent foreclosures. A large amount of them are owned by investors who bought the property with the intention to “flip” the house.
Up until recently if you were interested in buying one of these AZ foreclosed homes and you wanted an FHA loan, you wouldn’t be able to make an offer on a house that was being sold by the investor unless he or she had owned the property for more than 90 days.
In Arizona, most property flipping happens within the price range of the FHA home buyer and FHA accounts for more than 60% of financing transactions. This made it difficult for the buyer and the seller.
As of February 1, 2010, FHA has waived their anti-flipping rule. This was done to “help facilitate the return of repaired and habitable properties on the market in a timely fashion”.
Private Sellers and Investors can now sell their properties to FHA buyers without having to wait 90 days.
Here are some of the rules that FHA has established regarding the sale of properties that have been owned by an investor for less than 90 days:
- The transaction must be Arms-Length. There cannot be an identity of interest between the buyer, seller, or any other parties participating in the transaction.
- In cases where the sales price is 20% or greater than the seller’s acquisition, the lender must justify the increase in value with supporting documentation of renovation, repair and rehabilitation work.
- If no such work was performed the appraiser must provide an appropriate explanation of the increase in property value since the prior title transfer.
- The lender must order a property inspection and provide that report to the home buyer. Buyer’s may be charged for the cost of this inspection.
Since the time that HUD issued this policy change, many buyers in Arizona have found that a number of lenders are not willing to finance these properties regardless of FHA’s new policy.
However, there are a few that can and will do so.
Justin McHood, an Arizona Mortgage Commentator recently provided the FHA 90 Day Flip program details offered by Academy Mortgage, home of the Arizona Ten Day Close program.
