Breaking News: January 15, 2010, HUD's David H. Stevens issued a waiver of the 90 Day Flipping Rule that has prevented private sellers (LLC's, Trusts, etc) from from taking offers from FHA home loan borrowers. This waiver was issued for a period of 1 year, starting February 1, 2010. There are a few conditions, such as the seller can't be related to the buyer in any way. Also, if the home is being purchased for 20% or more of what the seller acquired the property for in the last 90 days, then the FHA borrower's lender must be able to justify the sales price via an appraisal, and possibly a second appraisal, which must include notations of exactly how the property has been improved upon to justify the sales price.
The other very odd condition that comes into play if the homes is being sold for 20% or more of what the seller purchased it for in the last 90 days, is that the LENDER must order a home inspection. This, until now I suppose, is very unconventional. The lender however can make the buyer pay for this home inspection. This inspection report, must be provided before the close of escrow, to the buyer. Based on what I've read…it appears that the buyer may still want to order their OWN home inspection from someone that they choose (not the lender's choice). Thus, they now, may have to start paying for two home inspections. Why would the buyer want to rely on the lender's home inspection report that they ordered, when it seems very possible the lender could order the inspection late, thus making it next to impossible to meet any contingency time frames regarding the buyers home inspection. The guideline simply states the lender must provide the report to the buyer, prior to the close of escrow. Maybe I read it wrong?
The inspection the lender orders for the borrower, must cover certain items, as outlined in the FHA guidelines (click link below for waiver and conditions). The use of an FHA approved inspector is not required however.
This move by HUD, will now enable FHA borrowers, across the nation, to purchase homes that have been foreclosed on, that are owned by private parties – not banks (not REOs). In some parts of the country, the inventory has really decreased, such as where I am, Santa Clarita, Ca. We have just a 2-3 month supply of homes as of today. FHA buyers will now have more home options on the table, and perhaps, more homes will be sold now as a consequence of this waiver of the 90 day flipping rule by HUD.
Download HUD FHA waiver of 90 day flip rule press release
Download HUD FHA waiver of 90 day flip rule – waiver and conditions
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