A review of the FHA 90 flipping rule

On Behalf of | Nov 27, 2020 | Uncategorized

Home flipping has become a popular topic for reality television programming and shows that feature this theme often gloss over the challenges of renovating properties for profit. However, in recent decades more Americans have taken on home flipping as a financial venture and a means to make money. Throughout California, home flipping happens in urban and suburban communities.

However, before jumping into the home flipping market, there are many rules and laws that individuals should know. Consultation with a real estate and real property legal firm can help prospective home flippers from getting in over their heads when the law impacts their plans. This post on the FHA 90 flipping rule does not offer legal advice and serves as an example of one issue home flippers should understand.

What is the FHA 90 flipping rule?

The Federal Housing Administration (FHA) insures mortgages that most home buyers need to purchase residential properties. A mortgage is a loan to buy real property, and often most of a real property purchase is financed through a mortgage. The FHA insures mortgages to protect parties involved in the real property market.

When individuals secure loans to flip properties, they may turn around and sell those properties at extreme profits shortly after taking ownership of them. When this happens it is possible for fraud and other forms of deception to impact the value of the properties subject to the flipping process. The FHA 90 day rule requires properties purchased with FHA insured loans to be in the ownership of the purchaser for at least 90 days before it is sold.

How the rule impacts home flippers

The cornerstone of home flipping is turning over homes quickly to move onto new real property projects. The FHA 90 flipping rule prevents home flippers from re-selling their properties within the first 3 months of ownership, and may place restrictions on how much the may sell them for in the months after. Individuals who cannot afford to hold onto properties for the 90 waiting period may suffer financial difficulties due to their inability to resell which could impact their flipping plans.

Real property and real estate laws evolve and change. Before venturing into the real property market, individual can benefit from discussing their questions and concerns with knowledgeable Bay Area real property lawyers.