There have been a lot of questions around rules as it pertains to Property Flipping Rules.  Property Flipping is when sellers buying a home and then flip it and sell it to your borrower.

The rules are fairly easy with the exception of FHA.

VA

No flipping rules. Sellers can sell one day after buying it with no requirement on the difference between what they bought it for and what they are selling it for.

USDA

USDA technically has no flipping rules either BUT USDA says if there is a “significant” increase in what someone bought it for and are now selling it for it must be “strongly supported” with validated comps to protect the borrower from potential predatory lending.

FANNIE MAE & FREDDIE MAC

No flipping rules either. Just common sense as to why there is a large variance in buy and sale price.

FHA

The purchase agreement must be signed 91 days or after the seller purchased the property. Case number cannot be assigned prior to the 91 days. If this does happen, you can get a NEW (not amendment) purchase agreement but the case number still must be after the purchase agreement date.

If sold from 91 – 180 days and the purchase price is 100% or more a second appraisal is required.

This means if they bought it for 100K and sell it for 200K or more the 2nd appraisal is required.

The buyer cannot pay for the second appraisal.

If the second appraisal is 5% or more less than the first appraisal the second appraisal value must be used.

2nd appraisal to be completed by FHA appraiser as well.

There are exceptions to the 2nd appraisal requirement, but rarely do you ever see one. Mainly if the home is owned by Government agencies.

There is a bit of discrepancy when it pertains to properties that were quit claimed and no money was exchanged. These are case by case and just send me the scenario and I can get you the answer. The intent is to keep flippers from taking advantage of borrowers and is not to limit family members or trusts or LLCs that own a property to not be able to sell when it makes sense.