I’ve got a question when doing an acquisition, rehab and resell in a short time frame…aka…flipping.
It’s my understanding that when one puts a property back on the market after rehabbing it…in order for it to comply with FHA “insured” regulations it must have been owned by the current seller for at least 90 days.
From the seller/rehabbers perspective, I find this very limiting. If you’re adverse to taking on more than one project at a time in this current market, that would mean you’d be limited to 4 projects per year…(+90 day turnover for each).
That’s excruciatingly slow for me.
If I can camp out at a place and do it in 23 days…NOT 90…then what am I to do? Twiddle my thumbs?
If renting is not an option I want to explore in this case…would like to know what others do to bring in qualified buyers that aren’t using FHA insured mortgages. Or is that what got us into this mess in the first place.
Seriously…would really like to get advise on velocity here, (btw, thanks Cliff…good observation on that subject the other day):
There are only 2 ways to get rich. Slow and quick. Get rich slow is to put 10% of your salary into a 401k for 30 years and when you are so old that you get around with a walker with an oxygen cylinder on it you are rich and can vacation every month. Quick is to get rich fast enough that you are young enough to look good at the nude beach when you vacation every month...I prefer quick.
The volocity at which you acquire wealth is not an indication of how sound the ideas are. There are sound ways to get rich in real estate and they are all represented here. If you want to do it quickly or slowly is your own choice.
I don’t sell via FHA financing so I can’t help there but I do have three seasoning letters I use when needed… I like flipping too so every once in awhile I have to help a lender say yes to a marginal buyer by supplying them with the ammunition to do so…
Keeping in mind that the lenders are justifying to the secondary lending market their files.
In this market it will probably be more than 90 days by the time you sell. You have the rehab time which can be done fast of course, but then you have to list and sell it. Average time in my market is 6 months. You can price it to sell in 30 days but then consider a 30 day escrow. If you offer seller financing or assign the contract you don’t need to worry about the FHA rule. There are many loan programs still available without the need for FHA approval. Check with a reputable loan broker in your area to find out what options you have for the buyer but honestly you’ll be holding the property for 90 days due to market conditions anyway.
Even if you only take 2 weeks to get the house ready to sell, by the time the house is on the market and goes through escrow - it will likely be at least 90 days.
And you only have to worry about the 90 days if your buyer is using an FHA loan.
You could always stipulate no FHA in your listing, but that might scare off potential buyers.
Try using a little salt and pepper. Oops, wrong seasoning. :beer
I agree with the above posters that you will find that by the time you get it market ready and get a buyer it will be 90+ days. In most markets 6+ months on the market is common. You should be selling below the comps to move it fast but even then can you really say that you can cut that time frame down to only 2 months and get a full rehab done in 30 days? Most likely not.
Is there some reason you can’t start the next one and get it finished and on the market (starting it’s 90 day count down) while you are waiting for the first one to sell?
With FHA the contract cannot be signed for at least 90 days. So you are looking more at 90-120 days. You can’t order the FHA case number for 90 days, and without that you can’t order the appraisal. The only exception is on a HUD foreclosure.
Based on what “christopher w” posted above…it can very easily be 4 months or more if using a FHA insured mortgage product.
I really want to cut that time in half, (less than 30 days for rehab, then less than 30 days for escrow). I don’t subscribe to the notion that it can’t be done.
Here’s my question:
On an entry level home in the neighborhood of $100,000, what would be the dollar amount that FHA would be looking for as a down payment?
The FHA first time homebuyer loan program only requires 3% down.
But, if you have to have 90 days of title seasoning before you can even put the property under contract, a buyer using an FHA loan won’t let your shorten your holding period the way you want.
No one is telling you it can’t be done sooner, we are just saying it can’t be done when your buyer needs to use an FHA loan.
If for some reason you are lucky enough to get a contract on this property that will close prior to having title for 90 days, you could counter offer with one line:
Closing date shall be (insert date of close past 90 days here).
If the buyer really likes the home and you are selling retail anyway most likely they will wait until you can close on an FHA loan.
I am saying that the foreclosure exception in HUD’s 90-day title seasoning rule only applies to the seller (HUD) who took the property by foreclosure. Once the investor buys the foreclosure from HUD, the 90 day title seasoning rule would still apply when he sells the property.