Expiration of Federal Housing Administration's Property Flipping Waiver

The real estate market will be changing in the coming months -- a decision from the Department of Housing and Urban Development will not extend their waiver beyond 12/31/2014, a decision that will limit investor/rehab contractors from buying distressed properties, fixing them up and selling them to a buyer within 180 days. So for all you HGTV fanatics out there who love those rehab shows, this practice might become more and more rare with new restrictions.

Most of the rehab projects exceed the "sell for more than 100% of the recent purchase price" portion of the rule, which means an investor would need to hold the property for at least 180 days before being able to sell it to a buyer using an FHA mortgage. Many first time home buyers use FHA mortgages and many of these flipped properties are in the price range of first time home buyers. 

A quick restore on a distressed property and flip is how these investors make money and revitalize previously lost pieces of real estate. The Federal Housing Administration is prohibiting this practice because it eliminates the most egregious examples of predatory flips within the FHA mortgage insurance programs. These investor/rehab contractors still have the option to sell the property under 180 days, however, the property is then not eligible security for a mortgage insured by the FHA (there are exceptions in the fine print). 

How this will affect the market in total will be determined in the coming months and years -- this certainly will mean a change in how house flipping is practiced. 

Image via: REMAX 

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