What You Need to Know About the 90 Day Flip Rule in Real Estate

The 90 day flip rule in real estate is a time frame set by the FHA to regulate the purchase of homes that have been flipped using an FHA loan. This rule was introduced to prevent fraudulent transactions and to ensure that buyers are not paying inflated prices for homes that have undergone poor-quality renovations. It requires that the seller of a flipped property owns the home for more than 90 days before it can be sold to buyers using an FHA loan. Let’s take a closer look at the key points of the 90 day flip rule:

The rule applies to homes that have been purchased and resold within 90 days.

If the sale price of the home is 100% or more over the price the seller paid for it, extra requirements will come into play.

The rule does not apply to homes sold by government entities such as HUD or properties acquired through inheritance.

The 90 day flip rule was implemented to prevent predatory flipping practices and fraudulent transactions.

The rule protects homebuyers from potential risks associated with hastily done or poor-quality home renovations.

In summary, the 90 day flip rule is an important regulation in the real estate industry that protects homebuyers from fraudulent transactions and poor-quality renovations. As a prospective homebuyer, it is important to be aware of this rule if you are planning on purchasing a flipped home using an FHA loan. By following this rule and doing thorough due diligence in examining the property, you will be better equipped to make an informed decision about the home you choose to buy.

Understanding the 90-Day Flip Rule in Real Estate:

The 90-day flip rule in real estate is a regulation put in place by the Federal Housing Administration (FHA) to prevent real estate investors from profiting significantly from a property flip. The rule states that a person cannot sell a house that has been flipped using an FHA loan until they have owned the property for at least 90 days. The rule is in place to protect consumers from buying homes that may have undisclosed defects or other issues that could affect their safety or well-being.

The Purpose of the 90-Day Flip Rule

The 90-day flip rule is designed to protect homebuyers from unscrupulous real estate investors who buy homes, make cosmetic changes, and quickly resell them for a profit. When a real estate investor flips a home, they often cut corners and make cosmetic changes that may not be up to code or may not be visible to the untrained eye. As a result, homebuyers who unknowingly purchase these homes could be at risk for safety hazards and other costly repairs.

Who Is Affected by the 90-Day Flip Rule?

The 90-day flip rule affects anyone who wants to buy a home that has been flipped using an FHA loan. The rule applies to both the seller and the buyer of the property. If you are a seller who has recently flipped a property using an FHA loan, you must wait at least 90 days before selling the home. Likewise, if you are a buyer who wants to purchase a flipped home using an FHA loan, you must wait until the 90-day period has ended before closing on the property. Here are a few key points to keep in mind:

• The rule applies only to homes that have been bought using an FHA loan.
• The rule only applies to homes that have been flipped within the last 90 days.
• The rule does not apply to homes that have not been flipped or homes that have been flipped using conventional loans.

FHA Loans and the 90-Day Flip Rule

The 90-day flip rule applies specifically to homes that have been purchased using an FHA loan. FHA loans are designed to help individuals who do not have a large down payment or who have less-than-perfect credit purchase a home. The downside to FHA loans is that they often come with stricter regulations. The 90-day flip rule is one such regulation. Here are a few key points to keep in mind:

• The rule only applies to FHA loans, not conventional loans.
• Most lenders will not allow a homebuyer to use an FHA loan to purchase a flipped home until the 90-day rule has been satisfied.

Exceptions and Exemptions to the 90-Day Flip Rule

While the 90-day flip rule applies to most flipped homes purchased using an FHA loan, there are exceptions and exemptions to the rule. The rule does not apply in the following circumstances:

• If the seller was a government agency, such as HUD or the VA.
• If the home was inherited by the seller.
• If the seller is a nonprofit organization that buys and sells homes to provide affordable housing.
• If the purchase is made with a conventional loan instead of an FHA loan.

Consequences of Violating the 90-Day Flip Rule

Violating the 90-day flip rule can have serious consequences for both the seller and the buyer. If a sale is completed before the 90-day period has ended, the seller may be subject to penalties and fines. The buyer could also be at risk of purchasing a home that has undisclosed defects or other safety hazards. It’s important for both the seller and the buyer to understand and follow the 90-day flip rule to protect themselves and ensure a smooth transaction.

How to Navigate the 90-Day Flip Rule as a Buyer or Seller

Navigating the 90-day flip rule as a buyer or seller can be challenging. As a seller, it’s important to understand the regulation and ensure that you have owned the property for at least 90 days before selling it. As a buyer, it’s important to work with a knowledgeable real estate agent who can help you navigate the process and ensure that you are not purchasing a home that violates the 90-day rule. Here are a few tips for navigating the 90-day flip rule:

• Work with an experienced real estate agent who understands the 90-day flip rule.
• If you are a seller, make sure you have owned the property for at least 90 days before listing it for sale.
• If you are a buyer, make sure to ask your lender whether the 90-day rule applies to your loan.
• Consider getting a home inspection to ensure the home does not have undisclosed defects or safety hazards.

Pros and Cons of the 90-Day Flip Rule

Like any real estate regulation, the 90-day flip rule has its pros and cons. The primary benefit of the regulation is that it protects homebuyers from unscrupulous real estate investors who flip homes for a quick profit. However, the regulation can also be restrictive, making it more difficult for sellers to sell their homes quickly and for buyers to purchase flipped properties using an FHA loan. Overall, it’s important for both buyers and sellers to understand the 90-day flip rule and work with a knowledgeable real estate agent to navigate the process successfully.