FHA No Flip 90 Day Law
First off, I would like to say the best thing about being part of the Association of Realtors® is the legal hotline. Where else would you have lawyers sitting around the phone waiting to answer your legal questions? For free?
I recently had the opportunity to use the broker’s legal hotline provided by the California Association of Realtors® because we had a question about the 90 day no flip law of the FHA. I think now that most loans are FHA loans I think it’s a law I should mention here and discuss in brief. (Of course, the disclaimer stands: I’m not an attorney and am not providing legal advice.)
If you wish to read the law for yourself, you can click here. Referred to as “24 CFR section 203.37a” or more commonly the “90 day anti-flip law” of the FHA it disallows you from selling the home (or even having it under a sales contract) you have bought with an FHA loan for the first 90 days of ownership. There are various other requirements regarding appraisal and so forth for period after the first 90 days as well.
Now you might say, who’s flipping? But the fact is, many people are, albeit for small profits. From what I hear, the number of bank-owned properties on the market are dwindling and although some Realtors® expect to see more listed later this year, the quality of REOs on the current real estate market leaves quite a bit to be desired. This may have just contributed to the perfect scenario for small profits in the quick-flip area. Rehabilitating REOs and then selling them on the open market might be welcomed by eager home buyers who have trouble finding decent homes that are not REOs (too much competition) or short sales (too unsure.)
Whether the inventory goes up from here with more REOs coming on the market according to predictions or it doesn’t, watch for more of these kind of flip homes as the bank-owned homes start to look less and less attractive because of their condition. As the market starts to recover, we may just see more flips before it stabilizes.
If you’re considering it, just make sure you know the laws around it!
