New Flipping Guidelines
Effective Monday, March 22, 2010,
will only allow FHA loans where the resale price is 20% or less above the
seller’s acquisition cost. Loans where the resale price is greater than 20% are not
eligible. All other criteria detailed by FHA under this waiver also apply. See the below
criteria:
• Must be an arms length transaction with no identity of interest between buyer and
seller or other parties participating in the sales transaction. To make this
determination the following applicable steps should be performed:
o Verify that Seller is in title as indicated on the Appraisal and no apparent family
or business relationship exists between the parties to the loan or sales
agreement.
o LLCs, corporations or trusts as sellers must have been established and operated
in accordance with applicable State and Federal law. Lenders must document
the validity of the seller. Business licenses, State Department of Corporations
status, and Attorney Opinions are examples of acceptable documentation.
o No pattern of previous flipping exists such as multiple transfers of title within a
12 month timeframe as indicated on the chain of title on the Appraisal .The
appraisal is required to show a 3 year history of ownership.
o Document that property was marketed openly and fairly through an MLS, an
auction, For Sale by Owner or developer. Note: sales contracts which have been
assigned to the current buyer are not allowed.
• The increase in value must be supported by the Appraiser with supporting comments
and documentation included as follows:
o Appraiser must indicate the seller completed legitimate renovation, repair and
rehabilitation work on the subject property to substantiate the increase in value.
o If the work was not performed, appraiser must provide appropriate explanation
of the increase in value since prior title transfer. This should include an analysis
of the market difference occurring between distressed sales and typical armslength
market sales