What is a FLIP transaction and FLIP Guidelines?
A "flip" is when a home is purchased and then resold in a short time for a profit. Often special requirements for these
transactions are required to obtain financing to ensure there is no fraud or the buyer/lender are not being taken
FHA has special requirements for property flip transactions:
The property must be purchased from the owner of record and cannot involve an assignment of contract.
Lender must obtain and submit to HUD documentation that the seller is owner of record.
Appraisers are required to analyze any prior sales of a subject property in the previous 3 years.
If a property is re-sold 90 days or fewer following the date of acquisition by the seller (goes by the recording date that
the deed was recorded in the name of the seller), the property is not eligible for a mortgage insured by FHA. The 90
day flipping rule to purchase a flip with an FHA loan expired on 12/31/14.
FHA counts the days by starting with the deed recording date and going through the date of the contract between the
buyer and seller. This must be over 90 days to have a chance of an FHA loan.
If the resale is between 91 and 180 days AND the resale price is 100% or more over the price paid by the seller,
there must be a second appraisal obtained. The buyer may not be charged to the borrower! For instance, the seller
bought the home for $50,000 and sells it for $100,000, the 2nd appraisal is required.
FHA reserves the right to require additional documentation such as a second appraisal if the date of the sale is
between 91 and 365 days AND the resale price is 5% or greater than the lowest sale price of the property
during the preceding 12 months.
The ONLY exceptions to these rules are:
* Properties acquired by an employer or Relo company
* Re-sales by HUD under its REO program
* Sales by other US government agencies of single family properties pursuant to programs operated by these
* Sales of properties by nonprofits approved to purchase HUD owned single family properties at a discount with
* Sales of properties that are acquired by the seller by inheritance
* Sales of properties by state and federally - chartered financial institutions and government sponsored entities
* Sales of properties by local and state government agencies
* Sales of properties within a Presidentially Declared Disaster Area
* Any subsequent re-sales of the properties described above must meet the 90 day threshold in order for the
mortgage to be eligible as security for FHA insurance