FHA Flip Waiver extended.

This one needs a little explaining.

Back in the good old days before the Great Mortgage Meltdown, FHA government loans had a rule that said they would not finance a property if the buyer had purchased it less than 90 days ago and the new purchase price was more than 120% of what the seller paid for it.

This did not affect the vast majority of sellers apart from one very important group.  The flippers,  Not the cute shiny black fish like creatures, but the people who like to buy property dirt cheap and sell it again next day for a vast profit.

Now we can debate all day long (feel free to pitch in) whether this practice is ethical or viable or even a good idea, but the point is the way the gurus teach it is that you buy a distressed property such as an REO using a hard equity loan, which is pretty much the same as cash, paint it and replace the carpets and then sell it a week later to a first time buyer using a small deposit and a big FHA loan.

The stories of newby investors getting the first part right only to fall foul of the FHA “no flipping rule” are legend.  It’s one of those mistakes you only make once.

So…  About 3 years ago (I’m not exactly sure when and it doesn’t matter) HUD suspended the rule in order to do something, anything to reduce the mountain of unsold foreclosures.   They’ve been threatening to reinstate it for several months, but the deadline has just been extended again through the end of the year.

Good news for flippers everywhere.