With little fanfare, the Federal Housing Administration (FHA) extended its “anti-flipping waiver” through the end of 2012 with the hopes of “accelerat[ing] the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight”[1]. The FHA’s anti-flipping legislation took effect in 2003 and was intended to slow home-flipping during the housing boom. According to the legislation, FHA-backed loans could not be used to purchase homes owned by the seller for less than 90 days. However, the waiver will enable investors to continue to purchase, refurbish and quickly sell homes to owner-occupants qualified for FHA loans.
Real estate agents cheered the extension right along with investors, one saying that “right now, we really can’t afford anything delaying or discouraging a qualified buyer willing to buy a home for fair market value” and citing the 90-day waiting period as a reason that some deals have fallen through in the past[2]. The FHA first waived the 90-day waiting period in 2010. There are still some FHA restrictions on house flipping, though. The sales must be “arms-length” and the sales price cannot be more than 20 percent of what the seller bought the property for unless the seller has documentation of renovation costs that justify the extra expense.
Do you think that the FHA should continue to allow flipping?
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[1] http://realtormag.realtor.org/daily-news/2011/12/29/fha-extends-anti-flipping-waiver-speed-sales
[2] http://www.palmbeachpost.com/money/real-estate/government-extends-waiver-of-anti-flipping-law-allowing-2063489.html
There should never have been an anti-flipping rule in the 1st place. Placing these burdensome regulations against people out to earn a buck used to be considered anti-American. Now its the American way. I’ll bet if it were large multi national corporations performing the rehabs, the rule would have never been proposed. But its the small business owners that don’t have a strong voice in Washington, nor are they making the “required” contributions to their representatives that are earning profits from buying, rehabbing, marketing and selling properties.
If government mortgage programs are concerned that fraudulent transactions can take place with unseasoned titles, why not simply require 2 appraisals on the property with the seller having to pay the cost of one? Oh wait… that would be a simple solution and beyond our regulators comprehension.
This should not be the function of the FHA. Investors continue to play an important role in the marketplace recovery and should not be the target of negative regulation/legislation.
That’s great about FHA waiving the anti-flipping rule, especially for investors, but what about the lenders? Are they going to comply as well? Currently many, specifically BOFA requires a 90-day wait on re-sell, and some prohibit entirely.
Anti-flipping rule was a knee-jerk reaction to a natural adjustment in a free economy. Short sale investors should be part of our salvation, not the boogey-man
The short-term investor could be part of our salvation. The reviled term, “flipping” needs to be recognized for it’s comtemporary definition. Too many consumers confuse modern day flipping with the diabolical flipping from the S&L scandal of the 1970s
Does it really matter whether FHA now allows flipping for most of us? Right now it seems in most areas the only investors buying for flipping are the lucky few who have straight out cash to do so, all others utilizing creative financing are either viewed as fraud or illegal! Good luck getting a bank loan for investments!
And, even though FHA now seems to be getting it when it comes to investor flips, what about, the lender themselves that put all kind of restrictions on closing docs, especially when short sales are invvolved? Will they ever get it?