The Central Valley’s flip market is about to change. This change will be good for investors rehabbing these properties and for FHA buyers that will be purchasing them. During the last year investors have been buying distressed REO properties for a discount and repairing for profit. This has helped local neighborhoods not only by creating jobs for the individuals that are rehabbing these properties but by taking the eyesore on the block and turning it to a beautiful gem. For the last year FHA buyers have not been able to take advantage of these move-in ready properties as FHA did not insure properties owned for less than 90 days from purchase. Thanks to HUD Secretary Shaun Donovan and his staff they have temporarily lifted the 90 day clause.
With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.
"This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed," Donovan said.
In today's market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.
The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.
