House Flippers-Do You Know About the FHA 90 Day Rule?
By Cindy Jones on April 29th, 2009You just got a great deal on a foreclosure or short sale property in Prince William County. You brought in your crew to renovate and now it is ready to go back on the market. But who can you sell it to?
Recently my buyers have encountered two properties in Woodbridge that were pristine and within their price range. They were excited and ready to write an offer. However both properties were flips and didn’t qualify for FHA financing.
Since a large percentage of buyers in our area, especially at the lower price points are using FHA loans those newly purchased and renovated properties are not available for them to buy. When you look back at the month of March of the 750 properties sold in Prince William County 257 of them were purchased with FHA loans. So close to 1/3 of the potential buyer pool in the county can not purchase a flip.
Even though the FHA changed the rules last fall to provide relief for lenders handling foreclosures it does not cover individual “flippers” who purchase properties to rehab. In an area such as Woodbridge this can be a surprise to both the investors, listing agents and prospective buyers.
As an investor it is something that you need to consider before you decide that it will be easy to make a quick buck on a flip. Your pool of prospective buyers may be a bit smaller than you thought.
Very good piece of information! In fact, I was just checking a property in Woodbridge, Va which looked very nice. Then, I checked couple of things. Firstly, it is way over its assessed value. Secondly, it was purchased for little and now being sold for three times as much. And lastly, the owner flipping this property is a real estate agent! Needless to say, he very carefully tiptoed around the 90 day rule by indicating “no FHA loans…” Had I not read your blog, I would have made a big mistake making an offer for this property!
Reny-I’m glad the post helped you. As I am sure you are finding out there are more and more flips showing up in the PW market and I suspect even some of the unsavvy investors are getting a surprise when they find out the property doesn’t qualify for FHA financing.
Thank you for sharing all this. I really hope that they do something about this.