If you are a flipper I have potentially GREAT news!

You may be asking me, Why is it only “potentially” GREAT news Andy?

Great question so give me a moment to explain…

As of right now there is a 90 day flip policy with FHA. What this has meant as a flipper is that you had to wait 90 days from the time that you bought the property (and your deed was recorded) before a fully executed contract with FHA financing would go through without any hiccups.

It was not impossible to sell your property inside that 90 day window, BUT with the amount of hoops that you had to jump through most investors (including myself) would just wait out the 90 days.

Hoops like mandatory 2 appraisals on the property…and the appraised value of the LOWEST appraisal is what FHA went with!

With already having difficulty at times with one appraiser giving you the appropriate value on your flip, this was like flip suicide to hope that 2 different appraisers (who you do not get to choose and most likely will never speak to) to both appraise the property at or above your contract price.

That’s right, if you had the property sold for $150k and one of the appraisals came back at $135k you would be screwed! There is no chance that the buyer, who is already getting an FHA loan because of the small 3.5% down payment, was going to have the additional $15k to come to closing with.

This left you either having to drop the price, and give up most or all of your profit, or go back to the market and get another buyer. Both of these scenario’s really stank if you ask me.

This is exactly why I would just wait the 90 days before accepting a contract on my flip deals that needed FHA financing.

Of course waiting the 90 days cost you either in terms of opportunity costs…or it cost you in terms of more interest going to your lender. Either way there was a cost.

Well the good news POTENTIALLY is that on January 1, 2015 the FHA flip policy goes away!

I say POTENTIALLY because they always have the right to extend.

FHA’s policy allowing less than 90 day flip transactions is set to expire at the end of 2014. For less than 90 day flip transactions, only fully executed contracts signed by all parties on or before December 31, 2014 will be eligible to be closed under the terms currently set forth in the FHA Credit Policy Manual. As of January 1, 2015, all FHA less than 90 day flip transactions will be ineligible. 

So, as a flipper this could be really good news! Provided that they do not extend past 12/31/14…we could all start flipping our FHA eligible properties even faster!

That means more PROFIT for us all! If I hear of any changes contrary to this I will be sure to update you.

As always, thanks for being a loyal StreetWise subscriber.