August 8, 2017
How soon can I sell my home? In our previous blog post on this subject, we examined the FHA loan handbook, HUD 4000.1, and what it has to say about how quickly you can sell a property purchased with an FHA mortgage once the loan has closed.
In general, FHA loan rules don’t have much to say about what the owner of record does with the property (with regard to selling it) once it has been purchased and occupied as per FHA loan requirements. The spirit of the FHA loan rules seems to be that the owner should be free to sell without restriction.
But FHA loan rules do have something to say about buying a home shortly after it has been purchased from another. There are restrictions on “flipping”, for example, which involves purchasing a home, renovating it, and selling it again quickly at a much higher price.
The FHA has anti-flipping rules that would prevent an FHA borrower from buying a flipped home, but there are some exceptions to the FHA’s anti-flipping requirements.
What are those exceptions? To start, let’s refresh our memory on the FHA’s anti-flipping policy. From HUD 4000.1:
“A Property that is being resold 90 Days or fewer following the seller’s date of acquisition is not eligible for an FHA-insured Mortgage.” Homes that were purchased between 90 and 180 days prior to the sale may be subject to a second appraisal which the borrower is not required to pay for. The second appraisal may also be required in cases where there is a 100% markup on the cost of acquisition of the property in the previous transaction.
That quote is found in the section of HUD 4000.1 titled, “Time Restrictions On Resale”. But that section also provides exceptions to these restrictions as listed below:
“Properties acquired by an employer or relocation agency in connection with the relocation of an employee;
-resales by HUD under its REO program;
-sales by other U.S. government agencies of Single Family Properties pursuant to programs operated by these agencies;
-sales of Properties by nonprofits approved to purchase HUD owned Single Family Properties at a discount with resale restrictions;
-sales of Properties that are acquired by the seller by inheritance;
-sales of Properties by state and federally-chartered financial institutions and Government-Sponsored Enterprises (GSE);
-sales of Properties by local and state government agencies; and
-sales of Properties within PDMDAs, only upon issuance of a notice of an exception from HUD.”
FHA anti-flipping rules also do not apply to homes that have been constructed especially for the buyer, or for transactions that involve a home that has been newly constructed, never occupied, and are intended to be purchased with an FHA loan.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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