Property Flipping refers to the purchase and subsequent resale of a property in a short period of time. The eligibility of a property for a Mortgage insured by FHA is determined by the time that has elapsed between the date the seller acquired title to the property and the date of execution of the sales contract that will result in the FHA-insured Mortgage. FHA defines the seller’s date of acquisition as the date the seller acquired legal ownership of that property. FHA defines the resale date as the date of execution of the sales contract by all parties intending to finance the Property with an FHA-insured Mortgage.
Resales Occurring within 90 Days or Fewer After Acquisition:
A property that is being resold within 90 days or fewer following the current owner’s date of acquisition is not eligible for an FHA-insured Mortgage.
Resales Occurring Between 91-180 Days After Acquisition:
A Mortgagee must obtain a second appraisal by another appraiser if:
- the resale date of a property is between 91 and 180 days following the acquisition of the property by the seller’s; and
- the re-sale price is 100 percent “over the purchase price” paid by the seller to acquire the property.
The required second appraisal from a different appraiser must include documentation to support the increased value. (This is where Chase Real Estate Property Information Questionnaire PIQ is critical)
If the second appraisal supports a value of the property that is more than 5 percent lower than the value of the first appraisal, the lower value must be used as the property value in determining the adjusted value. The cost of the second appraisal may not be charged to the borrower. The Mortgagee must obtain a 12-month chain of title documenting compliance with time restrictions on resales.