New 90 day flip rules: what investors need to know

Flipping a property in less than 90 days just got tougher due to an old rule that will go into effect again starting June 2015. In a nutshell, the rule states that buyers who wish to purchase a flipped property can't do so until 90 days have passed between when the seller purchased the property and when they are reselling. The full text of the new guidelines can be found in the new Single Family Housing Policy Handbook, which defines flipping as buying and selling a home at a significant profit in a short amount of time. 

But since only ~15% of loans are FHA, the more troubling and longstanding rule effecting the warrantability of flipped properties comes from Fannie May's regulation of conventional loans. This rule focuses on the seller's profit: if it's more than 20% from sale price to sale price, the 90 day rule is enacted here too. 

Conventional Loan 90 Day Deed Restriction

Here what is important is the deed's recording date--as in when the investor's deed was recorded. This date marks the start of the 90 day count. Within the 90 days, the property can be sold for anything less than 120% of the investor's purchase price, and has nothing to do with repairs or improvements. On day 91 and on, the property can be sold for any amount. 

FHA's 90 Day Flip Restriction

The same timing applies here: the 90 day clock starts with the transfer of title/deed record date when they initially purchased the property. From the transfer of title, 90 days must pass in order for a buyer to obtain an FHA loan. 

What does all of this mean? Short of finding the illusive cash buyer, investors will be waiting at least 90 days plus ~45 days for loans. My advice is to list the property when it's ready, and enter into an agreement with a buyer to execute a contract on day 91. This is really the only way to make the math amount to the 91 + 45, instead of potentially a whole lot more. 

Looking to flip a house in Chicagoland? Great! I'd love to help. Give me a shout now: 

Lauren Painter