The FHA 90-Day Flip Rule
If you plan topurchase a flipped homewith an FHA loan, you must abide by the FHA 90-day flipping rule. This rule states the seller of a flipped home must own the home for more than 90 days before a buyer can purchase it using FHA financing. As an FHA home buyer, you must wait until the seller has owned the home for at least 91 days before you can sign a purchase contract.
Guidelines For Sales Between 91 – 180 Days
There is also a flip rule for a property resold after the seller has owned it for 91-180 days. If the purchase contract:
Is dated between 91 and 180 days from the date the seller acquired title to the home
The purchase contract has a purchase price that is double or more than what the seller paid for the home
Then, a second appraisal is required for an FHA loan. The second appraisal must meet the FHA guidelines, including that:
A different appraisermust complete the second appraisal
The appraisal cannot be paid for by the buyer
If the second appraisal value is 5% or more lower than the first, the lower value is used
FHA Flipping Rule Exceptions
- Homes acquired by employers or by professional relocation firms in connection with relocating employees
- Inherited homes where the former owner passed away and the home was passed to the seller
- New construction being sold by the builder of the home
- Resales by HUD, other government agencies, banks, credit unions, Fannie Mae, Freddie Mac, or the REO program
- Homes sold by specific nonprofit organizations approved by HUD to rehabilitate and sell properties
- Homes in a disaster area that are given a specific exemption from HUD
