FHA 90-Day Rule (POPULAR)

UPDATE FOR JANUARY 1, 2015: If you read the article below, you’ll see that back in 2010, FHA waived the 90 Day Rule. But, as of January 1, 2015, the 90 Day Rule is back in effect. In other words, there is no longer a waiver and any resale to an FHA at this time will require the seller to have held the property for at least 90 days before resale.

The Old FHA 90-Day Rule

Before February 1, 2010, FHA had a very clear and very strict rule that basically said, “If you buy a property, you can’t resell it to an FHA buyer for at least 90 days after you purchase it.”

In fact, in some cases, you couldn’t even sign a contract with a buyer until after 90 days from purchase.

But, as of February 1, 2010, that restriction was waived, and FHA replace it with the following…

The Current FHA Rules

As of February 1, 2010, and at least through the end of 2012 (UPDATE: Now extended through end of 2014), FHA now allows investors to resell their properties as quickly as they want to FHA buyers. That said, there are some rules that FHA is putting in place for any quick resales. The two big ones for investors are as follows:

  1. All transactions must be arms-length, meaning that there must not appear to be any impropriety taking place between buyer and seller. This requirement also indicates that any prior flipping activity on the home in the previous 12 months may be a red flag to the lender.
  2. In cases where the investor wanted to sell within 180 days of purchase, and where the sale price exceeds the previous purchase price by more than 20%, the lender will be required to take extra steps to ensure the sale is legitimate. This may include a second appraisal and/or a full FHA inspection.

What This Currently Means in Real Life

Now that I clarified the FHA rules, let me explain how this translates into real life for rehabbers:

  • While FHA will allow quick resales (as soon as you want), not all banks that do FHA loans will do them in the first 90 days. In other words, some banks still adhere to the old FHA guidelines, even though FHA doesn’t require it. There are a lot of banks that will now do FHA loans immediately, so ask around to a couple loan officers or brokers and find a bank or two that will do an FHA loan without any time restriction; most of the regional banks will do these, but even big banks like Wells Fargo are now doing them. So, just because one or two banks say no, don’t give up.
  • If you plan to resell within 180 days, expect that you will need to have two appraisals on the property. Also note that the second appraisal can’t be paid for by the buyer — so either you (the seller) will need to pay for it, or the broker/lender will need to pay for it. This should be negotiated upfront so there are no surprises.
  • If you plan to resell within 180, expect that the lender’s underwriter will require you to furnish details of the rehab. This may include renovation details, invoices, receipts, etc — anything to substantiate the work you’ve done.
  • If you plan to resell within 180 days, you will need to do enough improvements to justify the higher resale price. There are no specific guidelines on how much work you must do, but if the appraiser or underwriter feels that you haven’t done enough work to justify the new resale value, your appraisal will likely come in low, regardless of comps.
  • If there has been a “pattern of flipping” (in this case, that means there has been more than one title change other than an actual foreclosure) in the past year, the lender will likely reject the loan and you may be required to wait 6-12 months to resell to an FHA buyer. This often occurs when an investor purchases from a wholesaler, rehabs and then plans on a quick resale — there are two title changes from the wholesaler to the flipper to the end-buyer, which will be a red-flag for an underwriter, so be aware of this potential issue when buying from wholesalers.

103 thoughts on “FHA 90-Day Rule (POPULAR)”

    1. Hector –

      Ive not heard anything about the 90-Day Rule being lifted (for anyone but banks and asset management companies). If this were the case, I imagine it would be BIG news in the investment world…but I dont see it happening anytime soon, unfortunately…

  1. My husband and I have a situation with a current FHA contract to purchase agreement. Does this rule apply in this situation: the home has been owned by my husband for over 20 years. We married several years ago, and we bought another home that we currently live in two years ago. He still owns the original house. In early September, we finally got around to putting my name on the deed along with his and added it to our real estate trust (we are both trustees). We spent 2 1/2 years fixing up the home, and it was finally ready to put on the market a couple of weeks ago. The first people that went through put in a contract to purchase. It was on the market only 2 days. The bank came back and said to stop everything because of the 90 day rule, but failed to check the transfer history before doing so. Our realtor stepped in, and proof of ownership was provided to the banks underwriters, and we have heard nothing. Would they consider that an “acquisition” by adding my name to the deed? There was no “sale.” Have you ever come across this? My realtor had not.

  2. Clarification – the buyers are trying to get an FHA loan, not a conventional one. If I had known there was going to be an issue with this, we may not have agreed to sell it to them. There were other people interested. We were hoping to sell it so someone could close by Nov 30 and get their tax discount. Thank you in advance for any comment.

    1. Hi PKB –

      The FHA rule generally comes into play based strictly on the chain of title. If the title has not been transferred in the past 90 days (which in your case it has not), I would think that the FHA would not have an issue with it. That said, the underwriters make the rules, and if they have an issue with the transaction, you could run into problems.

      You did the right thing by making the underwriter aware of the fact that title has not transferred; now its up to him to determine if thats satisfactory. If you dont hear back, have your broker get in touch directly with him; the broker should be able to contact him pretty easily.

      If you still dont get a satisfactory response, you have two options:

      1. Call around to a couple other mortgage brokers and have them ask their underwriters if this is going to be a problem. When you find one that wont impose the 90 Day Rule, have your buyers use that broker/lender instead;

      2. Cut your buyers loose, and find another buyer who doesnt require FHA financing.

      Good luck! And please let me know how it goes…

  3. Thank you for your response. We still have not heard back from our realtor regarding this. I talked with him yesterday, and it seems that the lenders underwriters have not gotten back with the buyer or their agent with any information. We do not know if it was even looked at, or where we are in line. It is very frustrating. Their time limit for all inspections is finished today, and we have not received anything in writing from them as to their intentions, or to ask for an extension. Nothing has been inspected, and technically, they would lose their right to an inspection because of not having anything in writing given to us regarding this situation . Our realtor said they can look for another lender, and they may doing so. We just need to know one way or the other! If we do not hear anything by the end of today, my husband and I want to give them a definite time period in writing as to how much longer we will be willing to wait for an answer (we are thinking 7 days at the most). Our realtor is encouraging us to work with the buyers since he feels we will most likely come up against this again, mainly because the buyer market our home is targeting are the first time buyers. I know the people really want our home, and Im sure they are just as frustrated. But, someone needs to get more proactive to get us an answer. It shouldnt be all that complicated. Interestingly, their lender is my personal bank where I have all my accounts. Makes me think about switching 🙂

    We also want the realtor to start showing the house again ASAP and let potential buyers know our home may be available again soon. The Nov. 30 deadline is fast approaching, and we do not want to be hung up on this if its going nowhere. I am going to take your advice and start making calls to other lenders (we used a broker two years ago when we bought our current home, so Ill start there). Ill let you know how it turns out. Thanks again!

    1. PKB –

      I would suggest that you take the initiative to start contacting a couple mortgage brokers and have them talk to their underwriters about the situation. If you ask three brokers to look into this, youll likely get info from three different underwriters with respect to whether the 90 day rule applies. If all three says it does, then all the rest probably will also. But, if even one says you dont have to worry about the 90 day rule, well then you can just have your buyers use that broker/underwriter!

      Remember, you have full control over your deals. If you dont like your buyers lender, find a lender you do like, and make your buyers use that lender. If they really want the house (and it sounds like they do), switching to your lender really isnt that big of a deal.

  4. Thank you again for responding so quickly. I heard back from the realtor this afternoon. The bank absolutely will not give the loan because they stated it was because it was a “flipped house.” They refuse to believe county records showing otherwise. Also, they didnt like the fact my husband had his ex wife on the deed from 9 YEARS AGO. They were divorced back then and he took her off the deed in early 2000. That was also an “issue” for them. My realtor is already working with another lenders underwriters regarding this. The loan officer there was astounded and thought it may not be an issue. I also put a message in to my attorney who handled the deed transfer, and who also specializes in real estate law about this situation. We all feel there could be a discrimination issue since their lender told them we were property flippers when they had written proof otherwise. Its one thing to state legally they cant do the loan because FHA says no change in deed is eligible, even if married couples put their spouse on the property; its another thing to state we are doing something that isnt true, mispresenting the truth to the buyers. This would give them the wrong impression about us, and could result in them not trusting us as sellers and lose the sale regardless.

    I did contact one broker so far (one we used two years ago for our house), and they do not deal in FHA. I found out the buyers are not eligible for conventional when I spoke with the realtor. So…on to the next prospect! I cant use my personal bank because its the same one that wont give the loan! I do plan on having some words with them when I transfer all my accounts out soon, and tell them why.

    I am also going to discuss having the attorney draw up an affidavit stating we are not flipping this property, and proof of ownership. It certainly cant hurt at this point. So now, we wait once again to hear back from the new underwriter.

    We all feel its very bizarre that the bank would keep insisting on something that just isnt true. Apparently, their loan officer is very young and inexperienced and got intimidated with the real estate agents. Anyway, we hope the buyers will not let this fluster them too much and agree to move to another lender if one is willing to do the FHA loan.

  5. Update: I found two brokerage companies in our area that said this is not an issue! They researched the situation and have lenders who will work with the buyers. They both agreed that something is really off, and that it is most likely something came up with the buyers not being qualified and they are putting it on us. In other words…..there is more to the story. FHA would not find this a problem. On the other side, two other major banks that both my realtor and I talked with said they will not bend. Its very strange! Neither one could come up with written proof that FHA says that a deed change (as in our case) is included in the 90 day rule.

    Now, hopefully, the buyers will give them a call right away now that they have the information. Otherwise, they need to tell us immediately if they do not want to proceed so we can get on with the sale of the house. I am also working with the attorney to draw up a letter or affidavit stating about our situation so its handy for lenders, either for these folks or any new ones if the house goes back on the market. Along with that will be the list of the brokers.

    Everyone agreed in all the years of being in this line of work, they have never come up with this exact situation. I hope my posts can help anyone else if they find themselves in a similar scenario. Thank you for letting me vent.

    1. PKB –

      Congrats on finding the brokers who can get this done. Ive certainly found in this business that there are things like this where you will get completely different answers based on who you ask…so asking around is always a good thing!

      Good luck getting this closed!

  6. Sorry to tell you, but there are no more funds for the Tax Credit. The entire funding of that program has been exhausted, unless Congress provides a new allocation and extends the program. Have your buyers write their Congressman for an extension of time.

  7. Change of ownership has exemptions. They include: Transfer of title solely between husband and wife; transfer to a trust for the benefit of grantor or grantors spouse, to a trust revocable by the transferor, or to a trust from which the property reverts to the grantor within 12 years. All are exempt from change of ownership in accordance with Section 480.03 of the Federal Revenue and Taxation Code. In what State is your home located? Im surprised that the underwriter has not been informed of their error. Every agent in California is aware of Change of Ownership exemptions, because it is addressed in every sale transaction.

  8. I own a home that we have been trying to sell via an investor/short sale negotiator. Part of the process was to transfer title to the investor who in turn listed the home for sale while he negotiated the short sale with my mortgage-holder. The intent was to find a buyer (which we did), negotiate a short sale price with the bank (which we didnt), and the investor would profit from the difference. There were absolutely no direct costs to me. Although we have a buyer under contract, the investor was unable to complete the transaction on the bank side and is turning the property back to me. I still have a buyer, but the problem I face now is that with the investor quit-claiming the property back to me, it appears that I might be facing the 90-day flipping rule. My (FHA) buyer has been very patient, for 5 months now, but I dont know if he will wait out another 90 days.

    Since the title transfers between myself and the investor occured with no actual purchase taking place, will the rules allow me to proceed with the sale to my buyer using FHA, or will I need to convince the buyer to wait another 3 months?

    1. Jack –

      This is going to be a decision that the underwriter for your buyers particular lender will have to make. Normally, if there is any transfer of title, the underwriter is going to be very conservative, and will generally required 90 days before he will allow a sale. But, if you can get in direct contact with the underwriter, and explain the situation, he may be willing to overlook the title transfer and allow the sale to go through prior to the 90 days.

      My recommendation is to contact the buyers broker/lender directly, and explain the situation. Have the broker/lender get in contact with the underwriter, and take it from there.

      Unfortunately, its probably a long-shot, but you may be able to make it work. Another option is to find a broker/lender yourself where you know the underwriter will allow this sale to take place, and then encourage your buyer to move to that broker/lender.

      The good lesson here is that you should NEVER sign your title over to someone without having a very good reason for it. Theres no reason why the investor you were working with needed to be on title to negotiate a short-sale with the bank. In fact, by signing over the title, you were risking having your entire mortgage called due by the lender, which would have made it even more unlikely that a short-sale would be allowed. Why did the investor need to be on title to help you negotiate this?

  9. Just wanted to know if you had any info on the 90 day rule on conventinal loans? It appears that my buyer cannot qualify because conventional now requires the same standards as FHA, meaning you cannot flip it within 90 days of being on title for more than 125% of what you paid for it. Is this bogus or a new rule just adopted. Nobody seems to know the answer.

    1. Hey Liam –

      I hadnt heard that there are an restrictions on conventional loans (at least not through any major lenders) these days…

      Did you happen to purchase the property as an REO through Fannie Mae? If so, Fannie Mae has restrictions on when you can resell the property and for how much. Basically, its similar to the FHA restriction, but on the *seller* side, not the *buyer* side.

      If thats not it, I really dont know. Ill ask around and see if anyone else I know has experienced this restriction on a purchase with a conventional loan.

  10. Thanks for the quick reply. What I have heard and what some investors are running into is, if it is conventional but less than 20% is put down, banks wont touch it for 90 days because the mortgage insurance carriers wont insure it. I purchased it at an auction and did conventional financing putting 25% down and had no problems getting the loan. Now i am selling it for a lot more than my purchase price and thats where i am running into difficulty. The appraisal came in higher than the sales price. It appears some lenders are imposing this rule even though it is not mandated by Fannie or Freddie. Each bank is making their own determination much to dismay of investors trying to make honest money based on the market value.

  11. Recently my buyers wrote a contract for an FHA loan on a 1921 home that had been remodeled. The owners, one of which is the realtor, bought the house in April 09 at Sheriffs sale. One of the owners is the main investor, meaning he was the money man. The other owner invested very little but is the realtor and designer and oversaw the contractors, etc. The problem is that the investor owner did not record the deed. When we turned in the contract, the title company saw the discrepancy and filed for the owners on Dec. 4th. The contract was written Nov. 14 of 09 and we were set to close Dec. 15th.
    HUD underwriters are saying a big NO to closing the 15th.
    I understand from the article above the text to say “ownership” and that some underwriters look at recording date. The deed was “executed” the 24th of April/09, but not recorded until 12/4/09.
    Is your advice to keep talking to FHA underwriters until we find one that will do the loan now? Or should the buyers lease from the sellers and present a new offer 91 days after recording and close then.
    I am the selling realtor and want to give my buyers the best advice possible. They were able to lock in an interest rate of 4.875 and dont want to lose that. We thought about asking the sellers to buy a lock on their rate since it is their fault in not recording the deed.
    What are your thoughts and ANY suggestions!
    Thank you and respectfully,
    Susan

    1. Hi Susan –

      I would recommend that your buyers try to find another broker/lender and a different FHA underwriter. Ive noticed that about 50% of the underwriters will look at the recording date of the deed to determine the start of the 90 days, while the other 50% will go off the sale date (whatever is on the HUD). So, it sounds like you just got unlucky on the choice of underwriter.

      If you call a couple brokers, they should be able to check with their underwriters on what rules they follow, so you can find a broker that you know can help *before* you make your buyers switch.

      Its very likely that the buyers will also be able to keep the locked interest rate, assuming the new broker/underwriter go off of the same FHA loan number (which was assigned when the loan file was first opened by FHA).

      Good luck!

  12. Thank you for your very prompt reply. I did indeed find another lender/who has an underwriter who uses the sale date. Thank you for answering the question about the locked rate. The new lender was able to use the FHA loan number which was originally assigned.
    It looks like we will be good to go and close the first week of January instead of waiting the 91 days. My buyers are very very pleased.
    I actually got so crazy with buyers, I just now saw your reply. I had contacted another lender and she has been able to serve my buyers very well, but it is really nice to see your answer. Further confirmation that the correct decision was made.
    Thank you so much!

  13. Im looking at a home that is approx 40 days from being available for FHA but in 2 weeks that rule is lifted for a year.How soon before Feb 1st can I get things going.
    I want to offer prior to that date to try and get the house.
    Thanks.

  14. Check out this web site concerning the 90 day “flip rule” being lifted. It is under certain conditions and only for about 12 months.

  15. This rule has been lifted effective February 1, 2010 for a period of 12 months. Great news for all investors AND FHA buyers! The process will need extra documentations…all on the sellers (flipper) side. FHA buyers really have this one easy! Should have a lot more purchase opportunities.

  16. My father in law purchased an REO home in Jan of 2011, my husband is also the co deed holder on this home. It was done this way because the funds were available in cash, but now he wants to sell the home to us on land contract and says that he will be penalized if a loan is taken out on it with in the first year he had purchased it.. is this true? The contract he has had drawn up states that my husband and I be responsible for a set monthly payment, makes sense, in addition to that we are soley resposible for the property taxes and insurance, yet he is claiming the home on his taxes. I am refusing to invest money for improvements as well as investing in a new furnace or tax deductable appliance when I am not going to be able to claim any of this. I have yet to see this contract and have already arranged for my lawyer to review it. Nothing adds up on this and I am wondering if he and my husband, remind you the co deed holder, are not up to something that in the end leaves me screwed? Legit imput would be greatly appreciated.

    1. Dawn –

      Unfortunately, without more details, Im not sure I can offer any good advice or opinion. In fact, even with additional details, it would likely take someone with legal expertise in contracts to determine whether what is going on is reasonable or not. Since you are having your attorney review the contract, it sounds like youll get good legal advice, which is certainly more than I can offer here.

      Good luck!

  17. Im buying a house that was flipped, and got my loan approved with no points/fees, and rate locked at 4.875. Last week when seller (finally) provided the title, the lender rejected loan due to lack of seasoning. So I had to find a new lender, and now have to pay $2,000 to get the interest rate because seller didnt know about seasoning requirement. The seller refuses to pay the $2000, but I still want the house. The seller is also a real estate agent. Do I have any recourse to require him to pay the extra cost due to his error (e.g., legally or by reporting him to his broker)? Thanks for any infomation/advice.

    1. Hi Eileen –

      First, Im not an attorney, so theres no guarantee my advice is what a legal professional would tell you…

      That said, unfortunately I dont think you have any recourse. The seller doesnt have any legal obligation to ensure that you or your lender is informed about the short period of time hes held the property. Though, if he does this for a living (buying, rehabbing and selling), he should be aware of the fact that not every lender can get this done, and also verify that your lender can get it done. Its in his best interest as well as yours, as obviously he wants to sell the house as badly as you want to buy it.

      If anything, this is the fault of your mortgage broker, who should have requested information from the seller early on in the process; once the broker found out that the seller owned the property for less than 90 days, he could have asked the underwriter if there would be any issues. Unfortunately, because the broker didnt ask the question, I assume the situation didnt get revealed until the underwriter started looking at the packet of data, which was late in the process.

      So, in this case, while the seller was remiss in leaving this information out, it was the mortgage broker who made the big mistake, as he certainly should have known the FHA regulations and should have verified that the sale met the regulations.

      As for next steps, I would try to reach a compromise with the seller, perhaps where you split the $2000 loss in half and each come up with an extra $1000. If hes not willing to do this, then its up to you to determine how badly you want the house, and whether it is worth the extra cost. While I dont believe you have any legal recourse against the seller because hes an agent, its worth mentioning to him that as an agent, he has a reputation to uphold, and by forcing to you eat this cost due to his omission of information, hes putting his reputation at risk.

      If hes smart, hell realize that the negative ramification of potentially having you post this story all over the internet (with him and his brokerage mentioned) isnt worth just coming up with an additional $1000-2000 to help you out.

      Just my opinion…

  18. It was a great suggestion, but the seller wont help so I have to pay all of the costs, plus fee for a new appraisal. Thanks for the advice though

  19. Me and my husband recently found a home wed like to purchase. Upon doing some research to come up with a bid we found the house was just purcharsed by the seller on April 13. Can I get conventional fininancing this soon after the seller purchased the property?

    1. Lindsay –

      Most conventional lenders dont have any “seasoning” period these days, so you shouldnt have any problems getting a conventional loan (as opposed to an FHA loan) on the property. That said, I would talk to your mortgage broker and ask him/her directly, as every lender is going to have their own special rules…

    1. Hi J,

      If you take a look at the top of this article, youll see a link to my post about this rule being waived — back in February of 2010. It was waived again in January of 2011. So yes, you can now flip houses in less than 90 days to FHA buyers…

  20. According to Wells Fargo, there is a flip rule for conventional loans. We are in the process of a renovation/conventional loan and found about this the hard way. Less than a year and more than 15% and we have to pay for a second appraisal. Our loan officer never mentioned this and neither did our real estate agent. We really want the house so we paid for it. Just wanted to let others know.

  21. Im in Tucson Arizona working with a company whose business it is to buy trustee sold homes, rehab them, put them back on the market for sale, usually in less than 90 days. It has been our experience there really isnt a consistent position on this issue.
    The ultimate investor and underwriter makes the final decision and they can choose to be more strict than FHA, Freddie or Fannie. The originating loan officers rarely know these rules well themselves as they are written from FHA and they certainly do not have a good handle on what their investors underwriters are going to do. Here they tell Realtors, underwriters will not talk to Realtors. Getting through to one is almost impossible. Recently I have taken to giving the selling agent all the information including the documentation that I think they are going to have to have to get a loan.
    As an example, I give them the title documentation from the Trustee sale forward, how much the seller paid for the property, when the deed was recorded and when the trustee sale occurred, the approximate cost of the rehab with a promise of a list of
    those repairs should we come to an agreement. In addition if there are irregularities in the property, ie. a septic certification is pending, roof repairs pending, etc., they know that before they write a contract. I also give them the names of loan officers who are experienced in this flipping business and the companies they work with. We successfully close 6-10 a month but there is usually something that comes up we werent expecting. One lender recently refused to close on the house unless the buyer agreed to get a Realtor who represented only him. They wouldnt permit a dual agency which is common in Tucson. Fortunately my seller agreed to pay a fee for selling to both Realtors. We have been successful getting mfg flipped homes closed as well. I agree with you completely finding the appropriate loan office, lending company and an underwriter that know this business is vital.
    I would also like to address a tone in one of your readers emails, that implied she would have been a bad person if she had been a flipper. These “professional” flippers are people we should all be grateful to as they are providing among the nicest homes on the market; because they are willing to take the risks of buying, often sight unseen, confidently and frugally renovating to the tastes of the market with up to date products. They are eliminating foreclosed properties sitting, vacant, boarded up homes that make neighborhoods ugly. They turn what would have been that kind of house, into a beauty that we usually sell within the week. I take pride working for a “professional” flipper who turns out beautiful homes for me to sell.

  22. Hello Mr. Scott,

    Im a new investor out of Columbus, GA. I recently purchased a house October 10, 2012 from Econo Homes which buy and sell homes all over the US. Since the purchase I have rehabbed the property and re-listed it on the market which took about 3 weeks to a month give or take. Within a week of the property being back on the market, I received an offer from a FHA buyer. I knew a little about the FHA 90 day restriction because I breezed up on it while looking at one of your Result to Date postings. But what I didnt know until reading more in-dept was that I might be subject to complications because their has been more than 1 change of title within the last 12 months. Do you have any advise as to what are my options at this point.(ie funding, time frames , resolutions) Thanks in advance!

    1. Hi Aaron,

      Ive written about this a bit, and I definitely recommend that rehabbers stay away from wholesale deals where there will be multiple title transfers prior to the rehabbers purchase. As youve realized, FHA will red-flag the transaction and it can be very difficult to get an FHA through underwriting.

      My two best suggestions are as follows:

      1. If at all possible, try to find an non-FHA buyer. This is the most reliable solution to the problem.

      2. If you really want to sell to an FHA buyer, youre going to need to find an underwriter who wont red-flag the transaction. To do that, youll need to ask some knowledgeable mortgage brokers and loan officers in your area to pose the question to their underwriters and see if any of them will be okay with this transaction — if you find someone, youll have to get the buyers to use that broker/lender.

      The last time I encountered this situation, the investor was able to get the buyers loan to close through Wells Fargo, but I know for a fact that many WF underwriters wont allow it. So, if you want to try WF, youll need to ask around and find a specific underwriter who will do it. Also, the smaller regional banks are probably going to be a little bit more lax with enforcing this rule, so they might be a good place to start.

      Sorry I cant offer a better solution…

  23. Dear Mr Scott

    Im working towards jumping into my first rehab flip project and would like to get your opinion on a few things. First, would you use a realtor to find these opportunities? Do you think it is beneficial to get a local real estate license to find your own properties? Would you start small in a condo or townhome before jumping into bigger projects? Lastly, is there a formula or rule you use to determine whether would be better as rental property or a flip? Thank you for what you do here, this is one of the best website Ive been to… even your followers are knowledgeable and helpful.

    1. Hi David –

      First, Im a big fan of getting a real estate license if youre really serious about getting into this business. It will open up a whole new world of opportunities!

      As for hiring a real estate agent, thats definitely one way to go. Youll need to decide how you want to find leads, but if you decide to go the MLS route, a real estate agent (or your own license) can definitely help.

      As for townhouses, Im not a fan. The homeowner fees tend to be high, and there is a lot of risk if the condo association goes out of business. When deciding whether to flip or rent, you need to run both analyses and see which is better.

      Btw, Im almost done writing a book that will answer all these questions — stay tuned and check back in a couple week (or sign up for the Newsletter for notifications)…

  24. Thanks for all of these details! I have read every single link of your education articles. You are the freaking man, and also the reason I havent gone to bed until 2am the last week straight.

    Great article, especially highlighting how to beware of wholesale deals, which could encumber the deed for a certain amount of time.

    Also, I think this exposes yet another reason to stay focused on that $80-130K price range as you mentioned. The difference from 3.5 to 5% is not quite as significant at this price point, and should still make the property attainable to some first time buyers.

  25. Mr. Scott,

    Thanks for the quick response, I will look into these options.

    Thanks for the time and efforts that you put into your website, you can only imagine how much help you have been to people like myself.

    Be Blessed!

  26. i have a question. i live in pa and im buying a house off an investor who just settled yesterday 11/16/12 and my realtor and mortgage guy said i have to wait 90 days to even put house under contract is this true? im not really understanding the new fha rule.. they purchased house for 220k and im buying for 260k please if anyone can help would be greatly appreciated

    1. Rick –

      Are you getting an FHA loan? Assuming so, there are some lenders who will require that you wait 90 days to purchase the property, and then there are even some lenders who will require you to wait 90 days just to put the property under contract (these lenders are very rare, but it appears you found one). There are lots of lenders out there who will not require you to wait 90 days for the contract or even for the purchase — theyll allow you to purchase immediately. You just need to find one of those lenders. I would recommend talking to a couple good mortgage brokers and let them know the situation — a good mortgage broker will know which lenders to use so you dont have to deal with the 90 day resale issue.

      Now, all that said, theres another issue youre going to need to be concerned about. If the investor who purchased the property didnt do any renovations and is now trying to sell the property for $40K more than he purchased it for, the appraisers for the property are likely not going to value the property at $260K. Appraisers will say that if the investor purchased the property for $220K and didnt do any renovations, then the property is still worth $220K. And you likely wont be able to get a loan to buy the property for any more than about $220K.

      This is something else you should discuss with your mortgage broker ASAP so that you dont spend a lot of time trying to get a loan that will never get approved.

  27. My daughter bought a home from the seller who bought it on a short sale. She is paying cash for the home. It is not a short sale for her. How long does the seller have before it can be closed and she can take possession ?

    1. Hi Ruth,

      It depends on the terms of the short sale. Most banks require the short sale buyer to hold the property for some period of time — 30, 60, 90 or 120 days are most typical — before they can resell the property. Youll want to ask the seller (the person who bought the short sale) what the terms of the sale were. They should know.

  28. This is the story……the realtor who had the short sale listing sold it to a person…who then backed out of it in 2 days. So the realtor stepped in and bought the house….paid cash for it. Then put it on the market . My daughter loved the house… and he took her offer.. he made a big profit. He wants the closing done in May, so that would be 60 days. This might be all legal…I would like to know. He was not my daughters realtor that showed her the house. This all took place in about 4 days. Thanks.

    1. Hey Ruth,

      This would only be legal if the agent disclosed to the bank that he was going to buy the short sale he was listing. If he purchased it in a business entity or trust and didnt disclose his ownership of the buying entity, he committed fraud. You can ask him, but hes unlikely to tell you if he defrauded the bank.

      Regardless, if your daughter doesnt know about any of that, she should be safe.

  29. WHAT WILL HAPPENED IF A SECOND APPRAISAL IS ORDER AND THE SECOND OPINION OF VALUE IS LESS. DO THE SELLER HAS TO REDUCE THE PRICE EVEN THOUGH THE REAL MARKET VALUE IS THE ONE ON THE FIRST APPRAISAL. WHAT IF THE SELLER THEN DECIDE TO WAIT THE 180 DAYS TO SELL, THE HOUSE AND THEN SELL IT FOR THE MARKET VALUE ON THE FIRST APPRAISAL BECAUSE THERE IS ANOTHER BUYER WILLING TO PAY THE ASKING PRICE.

    1. Esteban,

      If there are two appraisals, the lender will use the lower of the two. So, if the second one comes in lower than the first, the lender will use whatever the value was on the second one.

      If you wait 6 months and go to sell to another FHA buyer, they will do a new appraisal, and the lender will use the value from the new appraisal.

  30. Help! I am currently in escrow purchasing a new home. The property title was transferred on September 25, 2012 and our purchase contract was signed on March 19. When the title was transferred on September 25, the property was dirt. There was no home on it. The builder began construction after September 25. Now our lender is claiming this is a filpped property because the date of title transfer to the date of the signed pruchase contract is less than 180 days. Heres my question, can new construction be considered a flipped property? As a result of this, the lender is requiring a second apprasial and raising our closing fees.

  31. No. New Construction is exempt from Property Flipping Guidelines, as the previous sales price was not based on the improved property with the home on it. FHA is very clear about this, but Ive heard of lenders making this mistake before.

    Exceptions to the 90 Day Flipping Guidelines
    The following exceptions to the 90 day flipping guidelines are still applicable and remain unchanged from previous guidelines:
    ? Builders selling a newly built home

    There are other exceptions, but this one is just about the easiest.

  32. I put in an offer on a property that falls under the FHA 90-Day Rule and was not advised by my lender/loan officer that there would be 2 appraisals done on the property I was purchasing an, do I have any legal recourse since he didnt advised me of the 2 appraisals being done regrdless if I asked for a 2nd one or not? This is what happend, I put in an offer on a property that the seller counter offer requesting that I used a specific loan officer to do my loan. I accpeted the counter and agreed to work with his requested loan officer. When the first appraisal came out about one week after the appraisal was requested, the appraied amount was our offer amount but with items that the property didnt have. I disputed the appraised amount and the incorrect items listed for the property and my loan officer stated that we can ask for another appraisal on the property if I want which the seller will pay for. I agreed but then changed my mind afte speaking to my real estate agent about what might happen if the 2nd appraisal comes in at a lower amount. I advised the loan officer to cancelled the request for 2nd appraisal since I really wanted the property and only wanted to make sure that the items listed in the appraisal report was correct, the loan officer said not to worry about the amount and he can work with the seller regarding it if the 2nd appraisal came back at a lower amount so we proceed with the 2nd appraisal, which was supposely going to take another week before we received the report back. On 6/10/13, teh 2nd appraisal was emailed to me with an appraised amount of about $24k less than the 1st appraisal report that he sent to me. I reveiwed the report and found that the items listed in this report contained items that were in the property and they were the correct items such as the property having a swamp cooler for air conditioning and also noticed that the dates on both reports were one day apart from each. They were both requested prior to my request for 2nd appraisal and the lower appraisal report was signed and reported the day before the higher appraisal and way before 6/10/13. The seller refused to sell the property to me at the lower amount and when I confronted the loan officer about the dates on the appraised report, he stated that the reason why it took the lower appraisal report longer was because it had to go through auditing…now, I never heard of such thing before…Long story short, the seller will not sell the property at the lower amount and still till todays date have not sent us the cancellation notice and its been 3 days already. Do I have any legal recourse on the seller and loan officer?

    1. Hi Judy,

      First, Im not an attorney, so I cant give legal advice. But, everything youve stated sounds about right to me. There do need to be two appraisals in this situation, and they are generally ordered pretty close together, and if an appraisal comes in low, it will generally spend several days in an auditing process by the lender. So, all that is reasonable.

      Unfortunately, you dont have any recourse with the lender or the seller. While they should have told you the second appraisal was required, theres no law that says they have to. The big issue is that the seller has to pay for that second appraisal, so hopefully they didnt ask you to pay for it.

      The seller should keep in mind that they wont be able to sell to an FHA buyer for above that low value for 6 months now, as that appraisal will stick with the property. Perhaps you can remind the seller/lender of that and see if theyre willing to negotiate at all?

  33. J,

    Im in town on vacation from Afghanistan and was wondering if I could meet with you for coffee or a meal on me to pick your brain a little. Ive read your book and have ventured out on a few projects my self and would like the chance to set down and talk to you. I leave back out on the evening of July 8th. Your time would be appreciated. Thank you

  34. I have a friend who has the cash to purchase my dream home at the county courthouse steps. Im friends with the homeowner that went bankrupt. If my friend wins the auction for the foreclosed property, how long would a lender require me to wait until I can close on this house? Someone told me that the lender may want to wait a 6 month waiting period to confirm the seller (my friend) owns the property out-right. Does anyone know how this works in Georgia?? thanks in advanced!!!
    Chris

    1. Hi Chris,

      6 months is typical for a lender to require a purchase to be “seasoned” before they do a refi. Some lenders require 1 year.

  35. Hi,

    Im under contract with a house that fall under this guidelines but now the seller came back and said that he wont pay for the second appraisal. What can be done about it? Would this be a breach in contract?

    1. Diana,

      The Seller isnt required to pay for the second appraisal, though youre not allowed to pay for it (buyer is only allowed to pay for the first one). That said, youd think the seller would want to in order to get the property sold. Perhaps your lender will pay for it (this is fairly common) or perhaps the sellers agent will pay out of their commission?

  36. Do you know of any new FHA rule about flipping that would require a flipper to own a property 12 months before a buyer could purchase the home with an FHA loan? It has been several years since we have flipped, but are hearing this new rule went into effect in January 2014. We cannot find info anywhere.

    1. Hey T. Sloan,

      It will depend on who youre buying the property from and in some cases, how much youre selling it for. If youre purchasing a FNMA Homepath property, you can resell immediately for less than 20% above your purchase price. More than 20% and you have to hold for 90 days. Some other REO sellers have restrictions as well — but theyre less common than the FNMA restriction.

  37. I have a question…. Im the buyer. As a buyer i have to get an appraisal for the house i want to buy of $179K. The appraisal came back with a lower cost of $160K. Then my agent came to find out that the seller flips houses and seller put the house for sale before the 90 days. So now the seller needs to get an appraisal. The sellers appraisal came back saying $179K. This makes a $19K difference. So the underwriters made an appeal for the the 1st appraisal in having such a large difference. How long can this appeal take or can it be resolved? Is there a such thing as having a 3rd appraisal?

    1. Hi Carmen,

      If the $179K value can be supported with comps, its possible that the first appraisal could be revised or overturned. The underwriter has a lot of say in what happens, so if the underwriter believes that the higher value is supported, there is a reasonable chance that the appraisal could be revised or a third appraisal could be ordered (though that is more likely).

  38. What happens on a flip where buyer is FHA and one (fha appraisal) comes in at value, but the 2nd supporting appraisal comes in short? Do they both go to fha since only one can be given an FHA case number?

    Can you go with a new buyer and use the FHA appraisal that came in at value and have the new buyer get the 2nd appraisal or do both go to FHA..

    1. J La,

      Both will get reported and saved as part of the FHA file. So, getting a new buyer wont really help until 6 months has passed from the time of the appraisal.

  39. FHAs can be definitely be a pain from the sellers position. My first house flip went under contract more than 180 days after my initial purchase (closer to a year). The buyers bank still ordered a second appraisal even that long after the fact. You never know what youll run into.

  40. As a new investor I wanted to know how can I go about purchasing and flipping Fannie Mae homepath properties? Does it have to be my primary residence and do I have to stay in it for 12 months?

    1. Rashad,

      Fannie Mae typically has a “First Look” period of 14 days (maybe 15?) where owner occupants get first stab at the property. If there are no accepted contracts in that period, then it opens up to investors to purchase. If you buy during the First Look period, you must live in the house for 1 year. If you buy after the First Look period, you do not need to reside in the house.

  41. Hi J,

    I noticed that you had previously updated the blog stating that the current rule will hold until the end of 2014. Does this rule still hold true for 2015?

    Thanks for the input.

    Tyler

  42. Hi J,
    Does the 90 period start on the date the home was sold or the date it was recorded by the city/state in their systems?

    1. Lawanda,

      According to HUD, the 90 days starts when the purchase closes (the settlement date). That said, some lenders will make their own rules on top of FHA rules (called “overlays”) and in some cases these overlays say things like, “The 90 days start at recording,” or “The resale contract cant be signed until Day 91.” This is why its good to talk to your buyers lender before you sign a contract to make sure they dont have any surprise overlays.

  43. Hi J, Me and my hubby are first time home buyers, after searching about 20 different homes we finally found one we BOTH loved, then when it came to make an offer my relator told me we wouldnt be able to put in offer in until Sep because of this new rule, I find this strange because on the MLS listing it has FHA under the purchasing options. Do you think I should find another lender? I know if we wait 90 days the house we love will be long gone to another family. Any advice on how to get around this?

    1. Hi Tiarra,

      First, have you talked to your lender about getting a non-FHA loan? You can get a conventional loan for 3% down payment these days, so you should talk to your lender about a non-FHA option.

      If that doesnt work for some reason, I would talk to the seller and see if you can convince him to wait until September to sell it to you. Offer full price, offer a non-refundable deposit, or do what you need to get the seller to agree. But, unfortunately, there is no way around this rule, and finding another lender wont help — unless the new lender can help get you a non-FHA loan.

  44. Hi, I put a contract on a house and had been approved for a FHA loan, my realtor told me the house was purchased less than 90 days ago and according to FHA we could not do that. The 90 day waiting period was up in less than 2 weeks, I told him we would wait until the time period was up, he told us that would not work because we were already assigned a case number to that house that would be attached to it for 6 months. Is this the case?? We have lost our dream house because our realtor did not inform us of this regulation and because we put a contract on it cant do anything for 6 months??? He told us we could do a conventional loan but would have to put more money down and the interest rate would be higher, do we have any recourse here??? Please help!!

    1. Frank,

      Go find a new lender who is familiar with FHA regulation. He should be able to cancel the existing FHA case number and then get a new one. It may take a week or two, but Ive seen it done plenty of times.

  45. Does anyone no if there are profit limits on a flip when the buyer using Fha financing. I purchased a house for 60,000 put 15,000 into the property and have an offer on the table of 134,900. Will this be a problem with FHA financing? I understand 2 appraisals will be required. I think the property should appraise for selling price.

    Mark

    1. Mark,

      If the property appraises, you should be okay. That said, if an appraiser sees that you recently purchased for $60K, didnt put a lot into the rehab and are reselling for $135K, its possible that hell purposefully keep the appraisal from coming in. Unfortunately, Ive seen that happen way too many times.

  46. J,
    Thanks for your input. I think it might be worth proceeding with the sale. Im pretty confident the house should appraise, there are plenty of comps in the immediate area.
    Thanks
    Mark

  47. Im going through this now I just found out now today , I was only two weeks away from getting my dream home is there any thing I can do ?

    1. Hi Selena,

      I assume youre trying to buy the home? If so, here are your two best options:

      – Talk to your lender about potentially getting a loan other than FHA
      – Talk to the seller about re-signing the contract after 90 days

  48. I was just told by my realtor that the property they accepted the offer for by me cant go under contract until the 91st day in order for usda loan, I cant find any info about buying a flipped house under the usda rules. I know the purchase price by the seller and just found out we would be buying it for more than the 20% over what they paid and they didnt do that much repair to the property. I am really confused about all this.

  49. So we were told that the appraisal report was being sent to under writer and we should be able to close in a few days, moments later we were told by lender that we would need to do another appraisal and loan file because loan was done too soon. Our friend flips homes for a living and he found one for us by chance (we have 8 kids). We are all disappointed and trying to see if there is a hail Mary pass available. Who should have caught the 90 day rule or us beginning the process before the rule was up affect our not affect considering we are closing way after the 90 days. Who then pays for the 2nd appraisal considering our friend is not making money on this offer and lender says seller should pay……Plus is there a hail Mary pass in all of this?

    1. Hey Maria,

      It was up to the lender to catch this. A good lender is familiar with all the rules that go along with the various types of loans, and this is a very common rule for FHA loans. He should have known about it and he should have verified that this wasnt going to be an issue prior to the appraisal being done.

      Now, that said, if the flipper has much experience, he should have known about it too, and he should have let you know. All successful flipper I know are VERY familiar with this FHA rule (it affects a lot of deals), and the good ones are very proactive about letting the buyers (and their mortgage brokers) know about potential issues.

      So, I would say that this is the fault of the mortgage broker, and if the flipper does this for a living, its partially his fault as well. One or both of them should be paying for the next appraisal.

  50. J, maybe I am a little slow but I am a newby. Can you re-work this page and tell (a sentence or two) the pre-2010 at the top, 2010-2012 with a sentence, and then tell the story of the 90 rule as of 2015. As I read, I cant tell what is now and what is then. I really care what is now in laymens terms. Thanks

    1. Hey Michael –

      Right now, the 90-Day Rule is in effect. If you purchase a house today, you will have to wait 90 days (91 actually) from today before you can sign a contract with an FHA buyer. If you sign the contract before the 90 days are up, FHA will likely kick the contract back and make you get a new one signed after day 90.

      Let me know if you have any questions!

  51. We bought a house which closed on April 29. The asking price was 149,000, the appraisal came in at 144,000 and seller agreed to lower price and asked to move up the closing date. A week later, the lender called and asked if I would let an appraiser in to do 2nd appraisal as this was a flipped home. The second appraisal came in at 120,000! I wrote and reported this to consumer affairs and it was turned over to the FDIC. My bank has now decided to make my loan conventional. I also did not get the home inspection which was required for a flipped home and have spent over 5,000 in repairs that could have been caught. Do I have any legal recourse for this?

    1. Hi S Conrad,

      Unfortunately, I dont believe there is any legal recourse. Your lender should have been familiar with the FHA rules for flipped houses, and should have explained to you that two appraisals were needed. In addition, your agent should have advised you to get an inspection (always get an inspection!) and should NOT have allowed you to spend any money on repairs until the closing had concluded and you legally owned the property.

      So sorry this happened to you. I would recommend finding a new agent and mortgage broker if its not too late…

  52. I WANT TO KNOW IF THERE IS A WAIVER ON THE 90 DAY RULE FOR FHA LOANS? i REMEMBER WHEN YOU COULD PRESENT RECEIPTS FOR ALL THE WORK YOU DID AND IF YOU WERE MAKING LESS THAN 20%, ALL WAS O.K. i WANT TO KNOW THE 2017 RULES OR AT LEAST 2016 IF NOTHING HAS CHANGED. everything i READ IS OLD NEWS.

    1. Hi Peggy,

      There is currently no waiver in effect. If you flip a home to an FHA buyer, you will have to wait until day 91 to sign the contract.

  53. Hey Scott! I just purchased a house in Greater Detroit Area in Michigan for flipping purposes, and Im totally new at this. Im looking at closing within 30 days, assuming inspection and appraisal comes thru without issues. My real estate agent told me that Ive to keep the house for at least 6 months until Ill be able to list it for sale, doesnt matter if the buyer goes with conventional or fha. She said that no lender will lend to the buyer if I didnt have possession for 6 months. Is that true?

    1. Hi Abby – Your real estate agent is completely incorrect. If you have an FHA buyer, youll be required to hold for 90 days before the buyer can put a contract on the house. Any other type of loan there wont be any restrictions whatsoever. Not sure where your real estate agent is getting her info, but she is clearly wrong.

  54. I short sold my house on 5/30/17. The Nevada deed that I signed states that the buyer cannot sell above $80,000 for 90 days. He sold the house on 7/26/17 for $108,000. What can be done about this. Does anyone know who I can contact.
    Thank you!

    1. Scott – You could probably contact the bank that gave permission for the short sale. Contact the department that you worked with to negotiate the short sale (or that your agent worked with if s/he did the work).

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