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90 Day flip rule update

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Stephen McKee Verified

Real Estate Investor from Riverside, California

Sep 08 '09, 12:29 AM


90 Day flip rule update!

After killing my self to find a solution I came to a solid conclusion. THERE IS NO WAY AROUND THE 90 DAY FLIP RULE!

As a matter of fact. It's even worse then you think.

1. Be sure you get a cashiers check dated the same date as the offer prior to opening escrow.

Even though FHA noes not require the check to be dated the same as the offer the underwriters do. They do not have a clear understanding of the guidelines and will kill the entire deal over the check. And don't think you can fix this mid escrow. The buyers are required to submit bank statments so any more money moving around looks bad. You have to start all over again.

2. Make sure every thing else in your lender package is dated 91 days or more after the recording date of your purchase.

If an underwriter has any knowledge of the transaction being put together before the 91 day mark they will kill the deal.

3. Require the lender use your appraiser. HVCC does not apply to FHA direct lenders.

This is more a conflict of interest issue than anything. If the lender uses your appraiser then you should have no dispute over the value. It was your appraiser after all. Be sure the appraiser you choose has the same view on the market you do and will defend your value to a review appraiser.

4. Any home sold within 90-180 days of your purchase date requires a second appraisal.

The lender will get the appraisers info on his/her conditions list. Be sure to pass that info along to your appraiser so he/she can contact the other appraiser if they are from out of the area. Also, leave a copy of the comps in your appraisal at the subject property for the second appraiser. This is not a violation of HVCC according to the VP of the Appraisal Institute.


Edited Jun 26 2010, 09:38


Medium_rlg_logo__10622_x_4003__copyStephen McKee, Rehab Loan Group
E-Mail: [email protected]
Telephone: 951-790-0221
Website: http://www.80percentarv.com


J Scott Verified Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Sep 08 '09, 02:20 AM
2 votes


Stephen -

There are no hard and fixed rules about some of this stuff...a lot of it is going to be up to the specific underwriter you deal with, and some underwriters are going to be more lenient than others...

Some comments:

Originally posted by Stephen McKee:

After killing my self to find a solution I came to a solid conclusion. THERE IS NO WAY AROUND THE 90 DAY FLIP RULE!

The best way around it is to find a small, local bank in your area that can provide loans very similar to FHA loans, but without the seasoning rule. Find one of these banks, and require that all your buyers fund through them.

You'll never have to deal with another FHA loan again...


If an underwriter has any knowledge of the transaction being put together before the 91 day mark they will kill the deal.

Some underwriters don't mind the process getting started earlier than 91 days. In fact, all our loans are done with the same FHA underwriter (through the broker we use), and he's fine with the getting the process started early.

We generally get the buyers approved and the appraisals done within a week of the offer, then sit back until Day 91 comes. At that point, we get signatures, earnest money and start underwriting. We can close by Day 98 if things go smoothly.


3. Require the lender use your appraiser. HVCC does not apply to FHA direct lenders.

Some lenders will require that the appraiser be taken from their approved list. If you have an appraiser that is on their approved list, you can generally use him.

Then again, some lenders are requiring brokers to use third-party management companies, so you'll have no option to select the appraiser.

And then there are some lenders who don't really care who does the appraisal, and you'll be free to use your appraiser.

We have a list of appraisers that we use who span the gamut of lender approved lists, so we can often use one of our own. But, occasionally, the lender will want to go through a management company for the appraisal.


4. Any home sold within 90-180 days of your purchase date requires a second appraisal.

Again, this will depend on the underwriter.

Generally, if you're selling the property for more than 100% over what you bought it for within 180 days, you will be required to provide additional proof of value, which is often done via a second appraisal.

But for sales less than 100% over previous purchase price, plenty of underwriters will only require a single appraisal.


Be sure to pass that info along to your appraiser so he/she can contact the other appraiser if they are from out of the area. Also, leave a copy of the comps in your appraisal at the subject property for the second appraiser.


Better yet, don't ever let an appraiser through your door without you there with him. We will put a portable alarm unit on all our properties so that the appraiser will have to call our agent (my wife) to get into the property.

We'll meet him there, hand him a copy of the comps we have (and a copy of a previous appraisal if there was one), we'll hand him our renovations list, and a renovations budget, so he knows the work we did and how much we spent.


Edited Jun 26 2010, 09:38


Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Stephen McKee Verified

Real Estate Investor from Riverside, California

Sep 08 '09, 02:29 AM


FHA is 95% of our market out here. There is no way to avoid it. They also pay more than a conventional buyer. We do a lot of work prior to the 91 day mark but it has to all be post dated.

As far as appraisers go. That's an important note. My appraiser is approved with all the major banks in my area

90-180 day rule. In California every bank is requiring a second appraisal. I have yet to hear an acception. Freakin nightmare.


Edited Jun 26 2010, 09:38


Medium_rlg_logo__10622_x_4003__copyStephen McKee, Rehab Loan Group
E-Mail: [email protected]
Telephone: 951-790-0221
Website: http://www.80percentarv.com


J Scott Verified Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Sep 08 '09, 04:43 AM


Originally posted by Stephen McKee:
FHA is 95% of our market out here. There is no way to avoid it.

FHA buyers don't really care if they get FHA loans or not. They just want a loan where they can get approved with a credit score down to 580 and come to the table with only 3.5%.

So, find a local bank that will provide them the exact same terms (or better) than FHA, but with in-house underwriting, and you'll never have to use FHA again.


90-180 day rule. In California every bank is requiring a second appraisal. I have yet to hear an acception. Freakin nightmare.


See if your buyer's broker can underwrite with Fidelity. Their underwriters tend to be a lot more lenient, and you very likely won't need two appraisals. There's no FHA regulation that says 2 are needed, so it's up to the underwriter...

Just trying to help!


Edited Jun 26 2010, 09:38


Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Stephen McKee Verified

Real Estate Investor from Riverside, California

Sep 08 '09, 04:47 AM


There are no banks out here that do that. The are 0, none, nada, no PMI companies that will insure California over 80%. As stupid as that sounds it is the case. I know bank managers at a few great local banks and there is nothing they can do for me.

As for the second appraisal. Find the link below clearly stating a second appraisal has to be done on a flip from 90-180 days.

http://www.hud.gov/news/focus.cfm?content=2003-05-02.cfm


Edited Jun 26 2010, 09:38


Medium_rlg_logo__10622_x_4003__copyStephen McKee, Rehab Loan Group
E-Mail: [email protected]
Telephone: 951-790-0221
Website: http://www.80percentarv.com


Stephen McKee Verified

Real Estate Investor from Riverside, California

Sep 08 '09, 04:49 AM


Also, I appreciate the help. Frustrated cuz I've been down that road already.


Edited Jun 26 2010, 09:38


Medium_rlg_logo__10622_x_4003__copyStephen McKee, Rehab Loan Group
E-Mail: [email protected]
Telephone: 951-790-0221
Website: http://www.80percentarv.com


J Scott Verified Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Sep 08 '09, 05:25 AM
1 vote


Originally posted by Stephen McKee:

As for the second appraisal. Find the link below clearly stating a second appraisal has to be done on a flip from 90-180 days.

http://www.hud.gov/news/focus.cfm?content=2003-05-02.cfm


I assume you are referring to this point:

"Re-sales occurring between 91 and 180 days will be eligible provided that the lender obtains an additional appraisal from an independent appraiser based on a re-sale percentage threshold established by FHA..."

If so, that's exactly what I was saying above...the "re-sale percentage threshold established by the FHA" is exactly 100% above the previous sale price.

If you purchase a house for $50,00 and sell it for $99,999, FHA only requires one appraisal. If you sell it for $100,000, FHA will require two appraisals.

Here's the specific HUD regulation:

http://law.justia.com/us/cfr/title24/24-2.1.1.2.4.1.88.39.html

Check out (b)(3)(ii), where it says:

"However, HUD will require that the mortgagee obtain additional documentation if the re-sale price is 100 percent over the purchase price. Such documentation must include an appraisal from another appraiser..."

As for there being no local banks in California that do this, I know of at least on in the San Francisco Bay Area that will. If there's one, there's probably more...

Btw, I can certainly understand the frustration...these types of things are making real estate difficult on all investors these days. The key is not to give up...

As an example, when I started doing rehabs last year, I wanted a bank that could provide rehab loans so I could do as many rehabs as I wanted. Everyone told me that there were absolutely no banks left in the Atlanta area that would do these kinds of loans. On the 14th bank I spoke with, I convinced them to do this kind of loan, just for me. I now have a large line of credit from them. Had I given up after talking to 13 banks, I'd still be flipping using only my own cash...

Good luck!!!


Edited Jun 26 2010, 09:38 by J Scott


Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Tony Salazar

Rehabber from Corona, California

Sep 15 '09, 02:37 PM


Hello Stephen, I understand exactly what you are going through.
With some of the Flips that I have been involved with recently, I looked for buyers that could go conventional.

In Corona, there is little supply and large demand for entry level homes (170k-240K), that are clean and aren't a short sale. Due to this there are multiple offers. With multiple offers, comes a percentage of buyers that have larger down payments and will go conventional.

Are you not getting any conventional offers?


Edited Jun 26 2010, 09:43


Tim B

Real Estate Consultant from Minneapolis

Sep 16 '09, 07:23 PM


The Minneapolis/St Paul market is also very strong and inventory low for entry level homes - I'm getting multiple offers on my flips - most recent sales have been conventional - 20% down and excellent credit. The 90 day FHA rule is no longer an issue in this market.

The only problem is the lack of REOs - most get 10+ offers.


Edited Jun 26 2010, 09:44


Ty Hines

Real Estate Investor from Atlanta, Georgia

Sep 17 '09, 11:25 PM


J Scott,
who is it that you're using to lend on a 580 credit score? The last I heard the min. was 620. I would greatly appreciate the info.

Sorry to all for getting off topic.


Edited Jun 26 2010, 09:45


J Scott Verified Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Sep 19 '09, 01:11 PM


Originally posted by Ty Hines:
J Scott,
who is it that you're using to lend on a 580 credit score? The last I heard the min. was 620. I would greatly appreciate the info.

FHA will rarely (but sometimes) fund down to a 580 FICO if the rest of the credit history is pretty good (e.g., all delinquencies are old). These days, you don't see it very often, but we had a buyer who just got an FHA loan with a 590 median score, so I know it happens occasionally...


Edited Jun 26 2010, 09:46


Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


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