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