Buying a Flipped Property with FHA
Posted On: September 7th, 2009 by James Posted In: Mortgage Programs • Portland Real Estate
My team just came up against an FHA guideline, that stopped a purchase deal dead in its tracks. It was for a problem that we thought we had clearly addressed with underwriting prior to submission regarding the subject property being “flipped” by the seller. We had a client that wanted to make an offer on a property. But the seller had only actually owned the home for about 4 or 5 weeks, they had bought the property cheaply in a distress situation, and brought some improvements to it very quickly, and put it right back on the market.
We found out, after a LOT of digging that FHA loans will in fact NOT be approved in this scenario. Although there is nothing explicit in the approval guidelines that we could find, we could not find an underwriter who would accept this purchase for our client.
The rule is that the seller must be the owner of record for a MINIMUM of 90 days. The loan application process cannot even be initiated until the 91st day. All disclosures must be dated as such etc.
So consider yourselves warned out there in homeshoppingland.
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