Does a buyer have to wait 90 days to purchase an investor flip when using FHA financing?  A buyer does not have to wait 90 days to purchase when using FHA financing if the flip meets FHA guidelines.  FHA has extended the temporary waiver of its anti-property flipping rules until December 31, 2014.

The term "property or investor flipping" typically means buying an existing property under market value, rehabilitating it and then selling it at market value for a profit.   Investor flipping can also refer to the practice in which a property recently acquired is resold with little or no repairs for a substantial profit with an artificially inflated price.  In an effort to stop this type of predatory lending practice with respect to mortgages insured by FHA, HUD issued a final rule in May 2003, that states that FHA will not insure a mortgage if the contract of sale for the purchase of the property that secures the mortgage is executed within 90 days of the prior acquisition by the seller.  This is known as the 90 day anti flip rule. 

However, the downturn in the housing market over the last few years led to an increase of homeowners defaulting on mortgages, and resulted in a large number of vacant foreclosed homes.   These foreclosures affected neighborhoods and communities.   In order to stabilize neighborhoods and communities,  HUD first granted a temporary waiver of its regulation on anti-property flipping  in May 2010.    FHA has since continued to extend the availability of the temporary waiver.  The waiver is now available until December 31, 2014. 

The waiver is applicable to all single family properties being resold within the 90-day period after prior acquisition, and is not limited to foreclosed properties.  Moreover, the waiver is subject to certain conditions, and mortgages must meet these conditions to be eligible for the waiver.

If the resale price of the property is greater than 20 percent above the seller's acquisition cost, the mortgage will be eligible for FHA insurance only if the lender justifies the increase in value.   The lender must verify that the seller has completed sufficient legitimate renovation, repair, or rehabilitation work on the subject property to substantiate the increase in value by retaining supporting documentation in the loan file or by providing a second appraisal.   For example if an investor buys a property for $200k, and spends $50k in rehab costs, the total acquisition cost is $250k.  If the sales price is over 20% of the acquisition cost(in this scenario over $300k) ($250k +20% = $300k),  the investor has to prove the increase in value or get a  second FHA appraisal to support the value.