Financing in Scotts Valley>Question Details

Squareone Pr…, Both Buyer and Seller in Scotts Valley, CA

I was told by a lender that you could flip houses but you have to hold for 6 months now. Is this an appraisal issue or a lender or other issue?

Asked by Squareone Properties, Llc, Scotts Valley, CA Fri Jul 30, 2010

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Actually you only have to hold it for 90 days (can sell on the 91st day) from the last date of sale and it applies to FHA loans. Also, there is a limit on the amount of profit I believe. If the property should have a lot of raised value at the time when ready ot sell, you many have to provide the paperwork to prove the value is actually there.

They are doing this because of a lot of fraud that took place. People were buying and flipping right away at inflated prices.
1 vote Thank Flag Link Fri Jul 30, 2010
Latest Update:
January 29, 2011, FHA formally announced the suspension of their 90 day Flip Rule to December 31, 2011, so this long standing FHA flip rule has been officially extended by FHA for another year.
The thing to remember is that not all lenders will also waive their flip rules; if you need to find one - please contact me.
This flip rule waiver is limited to sales of the homes meeting the following conditions:
~no identity of interest between the Buyer and Seller.
~Seller holds title to the property.
~property was marketed openly on MLS, auction, for sale by owner etc. Any contracts that refer to an "assignment of contract sale" maybe a red flag.
~no pattern of previous flipping evidenced by multiple title transfers within 12-month period.

There are also special reguirements for cases in which the sales price of the property is 20% or more above the Seller's purchase cost; it has to be justified by supporting documents or a second appraisal. There's more to know - please email me if you need more information.
Natasha Nikolaeva,
Bailey Properties
831.818-6605
natnik77@netzero.net
0 votes Thank Flag Link Sat Jan 29, 2011
Good feedback here so I won't add much. I will only mention that whether your buyer is using FHA or conventional to purchase your property, it would be wise for you to furnish the following documents to the buyer's appraiser:

*before photos
*list of improvements
*specifications of improvements

Any dramatic increase in sale price from a previous sales price will be highly scrutinized. The best way to ensure that no delays happen or difficulties arise is to see that this dramatic increase is justified inside the appraisal report.

Good luck Squareone!
0 votes Thank Flag Link Sun Aug 1, 2010
Fannie Mae and Freddie Mac do not have a 90 flip rule. The bump in the road comes from lenders who have added their own guideline restricting a flip. In addition, FHA's 90 flip rule WAIVER is still in effect until February 2011.

You need to work with a mortgage broker who has many lenders to choose from so they can find one with no flip rule. I have successfully closed purchases involving 90 flips with more than 20% profit. Let me know if you need my help.

To Your Success,
Barbara
0 votes Thank Flag Link Sat Jul 31, 2010
Square one -

My experience is not on how much "profit" the seller has but the timeline. Most new buyer lenders will not lend on a house that is being sold less than 90 days from close of escrow. Those who do, seem to charge a slightly higher interest rate. It reduces the pool of buyers. If you can hold to 91 days, all should be good and you do not risk a new buyer's loan issues.

CJ
Web Reference: http://www.TalkToCJ.com
0 votes Thank Flag Link Sat Jul 31, 2010
Squareone as long as you do not make more than 20% proffit on the transaction and are willing to pay for the second appraisal that is required by FHA guidelines there is no reason that you can not sell them in less than a 6 month holding time. Be sure to keep all you reciepts and phtot document the rehab as the underwriter on the buyers loan may very well ask for that from you.
0 votes Thank Flag Link Sat Jul 31, 2010
Hi Squareone Property -

The FHA rule prohibiting seller to sell a home bought at foreclosure for 90 days (anti-flipping) has been suspended for the year since 02/01/10 and it should last till at least the end of 2010. Otherwise, I am not aware of other restrictions on when a seller can sell their investment properties. .

Here is a link to the news article .. http://www.washingtonpost.com/wp-dyn/content/article/2010/01…
0 votes Thank Flag Link Sat Jul 31, 2010
Sylvia Barry,…, Real Estate Pro in Marin, CA
MVP'08
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