The FHA 90 day flip rule is a policy that requires you as a property buyer to wait at least 90 days from the last approved deed before you can get an FHA loan. The policy is reviewed by an FHA approved appraiser and only applies to FHA loans. So if you are not using an FHA loan, the FHA 90 day flip rule likely will not apply to you. There are also numerous exemptions to the FHA 90 day flip rule.
Exemption to the FHA 90 Day Flip Rule Include:
- HUD resales
- If the property was inherited and the seller just wants to get rid of it quickly
- When an employer or relocator has purchased the property and no longer needs it
- This could also apply to movie studios or TV production companies
- Houses being sold by not-for-profits and the government
The good news is that if you do not fall into the 90 day time frame, the normal restrictions will not apply to you. But that doesn’t mean you’re 100% in the clear.
If you’re using an FHA loan and the time frame on the last deed is between 91 and 180 days, you have a few more restrictions, although they are nowhere near as tricky as the ones in the 90 day flip rule. If you’re curious about the deed and don’t want to wait for an FHA approved appraiser, have a title company do a title search to look for the latest transactions to see when the property was last sold.
These rules are mostly about the price the house is being sold for. The FHA appraiser is going to be looking at the price the property is being sold for and also the difference in % points between the seller’s purchase price and what the property is currently going for. If there is a massive difference (over 20%) the deal may fall through. This is one of the reasons FHA loans and properties are sometimes unappealing for real estate investors, but that same property can be an incredible deal for home buyers. The other main reason FHA loans are not appealing to experienced real estate investors is that they require the owner to live in the property as their primary residence.
If you plan on living in the property for a long time, then it could make sense and you can make money on the rental income as you can have up to four livable units (a fourplex) with these loans. But make sure you know what you’re getting into as the rules are very strict.
And that is what the FHA 90 day flip rule is, how it applies to buying and selling houses as well as what to know before moving forward with a property bound to the FHA 90 day flip rules.