HUD Waives 90 Day Flipping Rule for FHA Borrowers Starting February 1, 2010- Take note of the special conditions though.

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HUD’s David H. Stevens issued a waiver of the 90 Day Flipping Rule that has prevented private sellers (LLC’s, Trusts, etc) from taking offers from FHA home loan borrowers. This waiver was issued for a period of 1 year, starting February 1, 2010. There are a few conditions, such as the seller can’t be related to the buyer in any way. Also, if the home is being purchased for 20% or more of what the seller acquired the property for in the last 90 days, then the FHA borrower’s lender must be able to justify the sales price via an appraisal, and possibly a second appraisal, which must include notations of exactly how the property has been improved upon to justify the sales price.

The other very odd condition that comes into play if the home is being sold for 20% or more of what the seller purchased it for in the last 90 days is that the LENDER must order a home inspection. This, until now I suppose, is very unconventional. The lender however can make the buyer pay for this home inspection. This inspection report must be provided before the close of escrow, to the buyer. The inspection the lender orders for the borrower, must cover certain items, as outlined in the FHA guidelines (click link below for waiver and conditions). The use of an FHA approved inspector is not required however.

This move by HUD, will now enable FHA borrowers, across the nation, to purchase homes that have been foreclosed on, that are owned by private parties – not banks (not REOs). In some parts of the country, the inventory has really decreased, such as where I am Pleasanton, CA; we have just a 2-3 month supply of homes in inventory. FHA buyers will now have more home options on the table, and perhaps, more homes will be sold with this waiver of the 90 day flipping rule by HUD.

Download HUD FHA waiver of 90 day flip rule press release

Download HUD FHA waiver of 90 day flip rule – waiver and conditions

I would like to add that despite the great news, lenders may overlay FHA guidelines with stricter guidelines of their own. With that said, as soon as lenders acknowledge the FHA change in their individual guides, I will be sure to pass along the information.

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