Great news for rehabbers and home buyers utilizing low down payment FHA financing.  In a Federal Register notice Nov. 29 announcing the extension of waiving the FHA 90-anti-flip rule. Acting FHA Commissioner Carol J. Galante said the objective is to increase “the availability of affordable homes for first-time and other purchasers, helping stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high.”

Among the key requirements that will continue during the latest waiver:

• All transactions must be arm’s-length, with no identity of interest between the buyer and seller or other participants. Lenders are required to ensure that the seller actually holds title to the property. (In earlier flipping schemes, buy-sell transactions sometimes moved so fast that the seller never acquired legal title.) There should be no “pattern” of previous flips of the property during the 12 months preceding the transaction.
• In cases where the sales price of the resold property is more than 20 percent more than what the seller paid for it, there must be documentation showing the renovations and repairs that justify the markedly higher resale price. A second appraisal may be used to substantiate the increase in value, but the second appraiser must be selected from FHA’s roster. When no significant renovations occur and the price is 20 percent higher than acquisition, the appraiser must provide “appropriate explanation” for the sudden increase.
• Inspections are required of all the key components of the building structure and systems when price jumps exceed 20 percent. The inspection report must be provided to the purchaser before closing. If the inspection reveals structural or “health and safety” defects, repairs must be completed before the closing and a final inspection performed to ensure that the repairs have been made.

So, expect to see rehabbers actively in the market shaping up those distressed and/or abandoned properties for reasonable profit. Or if you want to be one of those rehabbers, you have 24 months to try it out and Good Luck to you!