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The FHA (Federal Housing Administration) has extended the temporary waiver of the less than 90-Day Anti-Flipping Rule.  The extension will permit buyers to continue to use FHA financing to purchase HUD-owned properties, bank owned properties and properties resold through private sales through 2011.

• The minimum credit score to these transactions is 640.
• Two (2) appraisals are required to support the property value when the increase is greater than 120% in less than 90 days.
• Justify the increase in value by retaining in the loan file supporting documentation and a second appraisal, which verifies that the seller has completed sufficient legitimate renovation, repair, and rehabilitation work on the subject property to substantiate the increase in value or, in cases where no such work is performed, the appraiser provides appropriate explanation of the increase in property value since the prior title transfer.
• Property was marketed open and fairly through listing service (MLS).
• A home inspection ordered in the borrowers name is required when the property value increase is greater than 120%.
• Multiple flips of the subject property are not permitted.
• Properties with multiple transfers (more than one), regardless of monetary profit, in the past 12 months, are not eligible for <90 day Credit Waiver.  91-180 days from the last transaction the seller may not sell with an FHA transaction until the 181 day has elapsed.  

Example: Owner A sells to Purchaser B on 12/10.

New Seller B sells to Purchaser C 3/22/11.

Seller C now is selling to Purchaser D on 3/24/11 this would be the 3^rd transfer, and the transaction is less than 90 day flip so not eligible for FHA financing. Seller C could not use FHA financing until 12/11 or after.

•  Receipts for materials and/or contractor bids may be required to show acquisition costs.
• Changes and overlays:

1. The second appraisal will impact seller concessions and the second appraisal must be on the GFE at time of application.
2. The guideline states that the second appraisal is a buyer’s cost that can be paid by a third party (lender, seller, etc.). However, the imortgage rule is that the second appraisal will not be absorbed by the branch.
3. Property must be purchased from owner of record.
4. Sale or assignment of sales contract not allowed.
5. One of the four documents must be provided:

• Property Sales history report
• Copy of Recorded Deed from Seller
• Copy of Property Tax Bill
• Title commitment or binder

 Common Scenarios:

1. Realtor can sell home, as long as they only play one role in the transaction.  If they are the seller, they can’t be the agent.  Refer to Bulletin attached

2.  If the seller owner who is a Realtor wants to use another realtor in their own office to sell it, then there needs to be a commission to that agent.

3.  If a corporation goes in and acquires and fixes, and sells, that is fine.  If they sell to a realtor to sell, then we have multiple property flips and it is probably not allowed in less than 90 days.

4.  If a contractor purchases a home, and fixes it, and then sells it to a realtor, to sell it, then we have multiple property flips, and it would not be allowed in less than 90 days.