FHA & Flips

It is becoming very common for investors to buy properties at auction, sight un-seen, renovate the property within about a month, and place the property on the market. If the renovation is done well, this improves property values and neighborhood quality. So what's the problem?

Unfortunately, although we do have a wonderful $8,000 tax credit available to first-time home buyers, these nicely renovated properties are not available to first-time home buyers with less than 10% downpayment (assuming they have to do an FHA loan). This is because of FHA regulations that say a property must be owned by the owner for 90 days before an FHA buyer can even write an offer on that property.

What is the effect of this 90 day FHA rule? The effect is that everyone but the typical first-time home buyer can buy nicely renovated, move-in ready, properties that are not sold As-Is. All the other affordable properties need a fair amount of renovation. It is truly unfortunate. Who is in charge of this FHA rule and why do they think it is in the buyer's best interest?