New FHA 20% profit rule......Anyone dealing with it???

Apparently the FHA has a new 20% profit guideline on properties bought and sold within months.

The rule states that property sold for MORE than 20% over the purchase price needs a SECOND appraisal.

I buy my properties directly from owners that usually owe NOTHING on these homes…They all need work and I ROUNTINELY buy them for LESS than 50% of market value. Every house I buy is OVER the 20% profit guidline.

Has anyone here dealt with this??? Is it enforced???

So far I haven’t had a problem but last week a realtor asked me what I paid for the house I just rehabbed??? She said it was OVER the 20% guideline and may trigger some additional scrutiny by FHA backed lenders.

Have you folks dealt with this???

This is the first I have heard of FHA doing this. I know Fannie has a similar rule that won’t allow you to sell or refi an REO purchased from them for more than 120% within 90 days. It just seems absurd they would even consider such a thing. I just bought a Fannie REO with cash and they try to tell me what I can do with it after closing. Crazy!

I’m not clear if this applies just to FORECLOSED and REO properties or ALL property bought and sold.

As I said…NONE of my properties are Foreclosed or REO’s, they all come from owners with 100% equity.

My understanding of the rule is it applies to any property that you have owned for less than 90 days and the purchaser is using FHA financing. Even then, it doesn’t mean it can’t be purchased using FHA financing - it just requires a second appraisal.

Just curious - what are you doing to find properties with that much equity at such a discount?

It can be done and IS being done already. If the spread is insane then they will want a 2nd appraisal, may request proof of work, receipts, etc. We bought a house for 29K and sold it for 89k and we had to provide nothing and they just did a 2nd appraisal. Piece of cake.

However one my students had a deal fall through the day before closing because the lender was skeptical of the chain of title on their property. The thing with FHA is its a total crapshoot. It all hinges on having a good banker or broker who can get these deals done. The ones with direct underwriting is even better.

One lender might want your DNA and bloodwork. The next FHA lender might want a 2nd appraisal and that’s it.


First, how does the purchaser know what you paid for it unless you tell them?

  1. where are you required to disclose this info?

  2. If Fanny, Freddie, or whoever is tracking this info, and releases it to third parties, have they illegally shared personal information?

  3. “cost” of the property, according to IRS, includes purchase price PLUS improvements. One would think that since one wing of the gub’mnt includes improvements, that the other wing of the gub’mint should also include the “cost” of improvements.

  4. probably about six other things about this issue that I haven’t thought of yet.

  1. It is public record and available online at many county auditor websites
  2. No need to disclose it it will come up during the title search
  3. No sure what you are asking since this is publicly available already
  4. Correct. Sometimes that will ask for improvement receipts
  5. let me know if there are more questions

FHA has waived the 90 day seasoning period so they want to protect their underwriting of new loans by asking for a 2nd appraisal. Not always required but it does come up, especially recently.

The thing is that FHA is just insuring the loans.
What actually is ‘‘required’’ differs from lender to lender.
While FHA may suggest that certain actions be taken, the lender chooses.

For example, FHA lifted the 90 seasoning rule for this year.
Well, if you are dealing with a mortgage broker who is going to get their loan sold to one of the ‘‘Big 4’’ Banks, then you’re going to be out of luck, because they don’t care that FHA lifted the ban.
But a different lender can do the deal because maybe they keep their loan in house.