90-day FHA Flipping Rule Waiver Set to Expire in Early 2011

In January of this year, the Federal Housing Administration announced that the “90 Day Flipping Rule” was being waived for one year. This rule was designed to discourage flipping by prohibiting FHA financing on any property that had been owned by the seller for less than 90 days. The fear was that the practice of flipping was leading to inflated home prices. The waiver was granted in order to help clear an inventory of foreclosed homes and carried a few restrictions including that the sale had to be an arms-length transaction, the home had to be openly marketed, and that the sale price was limited to 20% above the seller’s acquisition cost.

The anti-flipping rule waiver will be expiring at the end of January, so investors and listing agents should be aware that any property subject to these rules will likely need to be under contract before the end of the year to take advantage of the waiver. This is important because today roughly half of all purchase transactions utilize FHA loans, so without the availability of FHA, the universe of potential buyers narrows dramatically.

The extension of the waiver is certainly a possibility, even a probability, though the political composition of the new Congress makes any assumption dangerous.