The 90 Day Flipping Rule

It is no news that the current real estate market has attracted a large number of real estate investors. With all the great deals available and home loan interest rates extremely attractive it has become evident that some investors are taking advantage of the market by doing what is called “flipping”. Flipping is when an investor purchases a real estate property, makes some improvements and sells it for a profit.

If you’ve been involved with flipping, you’re aware of the “90 Day Flipping Rule” but if you haven’t here’s the scoop on this very important rule that could change the course of your real estate transaction.

Based on the “90 Day Flipping Rule” a lender won’t approve financing on a property that is being flipped within the first 90 days. So it’s extremely important that all parties involved in the transaction know the last time that specific property was sold. If it’s been less than 90 days a buyer may have to review their financing options. If purchasing with cash…no problem. But if financing is necessary, the buyer needs to make sure they're getting the correct mortgage.

FHA loans are now very popular but will be a problem for flipping properties. You see, HUD won’t allow flipping within the first 90 days so it’s in your best interest not to even get in contract until the 91st day. VA loans are OK.

Technically the rule does not apply to conventional loans (Fannie and Freddie) but it’s smart to make sure your mortgage professional is aware of each lender’s specific guidelines. Even though the rule doesn’t technically apply to conventional financing, different lenders will have their own “overlays” that could get in the way. Banks will look at the new appraised value, amount of profit, etc, and if not within the investor’s parameters it could be a problem. So the rule will vary from lender to lender and it’s crucial that your mortgage professional knows which lender to use in order to avoid surprises, especially after you’ve invested your time and money.

Post Category: Home Selling, Housing Market, General

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Disclaimer: The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®

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