Question: “There is a 91-day “flip rule” for any property purchased and sold to someone who intends to purchase your property with FHA financing. I know that applies to the REOs I’ve purchased, fixed up, and sold. Does it also apply to properties purchased from individuals?”
Answer: “Unfortunately, the answer that question is yes. That 91-day rule applies to any properties that you have purchased.
If you have purchased a property you intend to fix and flip, you need to pay special attention to this rule if you want to get paid for your work as a rehabber. FHA is currently backing most of loans for retail buyers.
Your contracts must be dated after the 90th day of your ownership of the property. If they are not, FHA will kick out the contract.”
December 17th, 2009 at 8:05 am
Are there any legal creative ways to circumvent this?
December 19th, 2009 at 1:27 am
Mark – I don’t think it’s going to do you any good to try to fight this one. I don’t think there is a way around it.
Now, if you can find some other type of financing (other than FHA), then you aren’t bound by this specific HUD rule. The problem is that FHA is backing up so many of the loans for retail buyers right now.
Another way to look at this is that you can use the time frame to your advantage. If you finish your rehab before those 90 days, you promote the property and show it.
However, you won’t be able to put it under contract. By the telling the buyer they can’t have it yet, you create scarcity. That can definitely work in your favor.
Also, I would also suggest that instead of trying to figure out how to get around this rule, you should focus on how you could do more volume. Put more money together so you can do more rehabs at the same time.
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