Anti-Flipping Waiver Extended Another 2 Years

FHA rules have generally prohibited investors from flipping REOs, foreclosures and non-distressed properties purchased with an FHA insured mortgage, but in 2010 that rule was waived. Because of the high number of distressed properties on the market, HUD waived the anti-flipping rule so that investors who owned a property for less than 90 days could renovate and resell it without penalty. The rule has been extended until December 31, 2014. Below are a few guidelines that govern the waiver.

  1. To qualify for the waiver the seller and buyer must have an “arms length” transaction that involves no collusion. That means one buyer can’t purchase the property with an FHA mortgage and then conspire to resell the same property a party for some secret gain.
  2. The property must be openly and fairly advertised so that all interested parties have a chance to view and purchase it.
  3. The property must have no history of multiple flippings in the 12 months prior to the investor’s waiver request.
  4. If the property is flipped for more than 20 percent of its appraised value, the seller requesting a waiver must provide documentation or a new home inspection to justify the value increase.

While some critics of the anti-flipping waiver fear that an increase in flipping may unstabilize property values in financially troubled communities, proponents insist that it allows investors to soak up excess housing inventory at no additional cost to taxpayers. To find out more about the waiver visit the U.S. government information site.

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