The new “flipping rule”
Us Department of Housing and Urban Development (HUD) enforces
a temporary policy that will expand access to FHA mortgage
insurance and allow for the quick resale of foreclosed properties.
Personally, I think the new policy will help the real estate market
recover expeditiously removing inventory quickly and allowing FHA
buyers to get into homes faster. Implementing the new guide lines
will enable buyers to utilize the tax credit that expires soon
(buyers need to be under contract by April 30th and closed by
July 01, 2010). This policy change which began February 01, 2010 Picture courtesy of the New York Times
will permit buyers to use FHA-insured financing to purchase HUD- owned
properties, bank– owned properties as well as privately owned resold properties.
The new policy is effective for one year. Previously, Sellers could not sell their
homes to FHA buyers until they owned the home for 90 days. In
order to protect FHA buyers from predatory practices of flipping
where properties are sold quickly at inflated prices to unsuspecting
buyers, the following criteria must be met:
*It must be an arms-length transaction, with no identity of interest between the buyer and seller or other parties
participating in the sales transaction.
*In cases where the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver
will only apply if the lender meets specific conditions.
*The waiver is limited to forward mortgages and does not apply to Home Equity Conversion Mortgage for purchase program.
Specific conditions and other details of this new temporary policy are available at HUD’s website.