90 Day Flip Rule: In Need of Clarification

13 Replies

Good Evening Investors,

Question. I closed on a house on 12/15/2017 and began renovations immediately, with plans to resell. The transfer of deed did not get recorded until a month later on 01/16/2018. I believe the 90 day rule starts from the date the deed was recorded (Jan 2018). However my question is this...

The property is ready to go on market tomorrow. Although I'm still within the 90 day limitation:

1) Can I/should I still list the property now? My 90 day anniversary will be 04/16/2018.

2) If I get a quick contract on the house, will a lender begin underwriting a loan for a perspective buyer since the closing would happen after the 90 day limitation will have expired? Or will a lender not even work with a buyer on a property that was listed for resale inside the 90 day window?

Thank you very much!

Adrian

The 90 day rule only applies to buyers using an FHA loan. If you are in a market where you have buyers that do not use FHA there are no worries and I would put it on the market. If you are relatively certain your buyer will be FHA, you cannot enter into a contract until 90 days after the deed was recorded

I hate this rule!! I would not wait, if your confident in your rehab and price it right you should not have a problem. Make sure you put in the notes that it’s not FHA eligible. You would think they would have a way to check for fraud now days with the advancements in technology and if it’s such a problem why don’t all the loans have this rule. It does nothing but hurt the buyer and seller this rule does. Anyways, we never wait to list and have yet to run into an issue, but not sure about your market out there. Every day you own that property you lose money and I believe they have a low money down conventional loan out there as well, but don’t quote me on that. I believe one of our homes sold to someone who used one.

If you closed on Jan 15th, why would the deed be recorded a month later? The day I close is the day of recording here in CA. 

90 days rule is for Buyer in FHA loan. You can list your property but buyer can't submit the application until 90 days past in FHA loan.

@Will Barnard maybe you can help me here. I closed on December 15, 2017.  The deal was in the state of Maryland. Now when I go to the SDAT Real Property Search website for Maryland and look up my property, under the "Transfer Information" portion of the page, it shows a date of 01/16/2018. So my assumption is that 01/16/2018 is the date it was recorded. 

@Harjeet Bhatti Thank you for your comment.

so as a lender, you would approve, and begin underwriting a loan for a perspective buyer on a property still within the 90 days of purchase by the seller, so long as the closing date is beyond the 90 day window... is that correct?  Or would you not even consider/approve a loan for a buyer until the 90 day window has expired.  (I hope my question makes sense)

The FHA rule reads that the sales agreement may executed until 90 days after the recording of the deed. Some lenders maybe flexible in that regards but when I have a buyer in this scenario, I want encourage them to get full loan approval so once day 90 comes the lender can order the appraisal and usually close within a couple of weeks

Hi Adrian--

You can actually use the Sale Date NOT the recorded date.  As long as you can retrieve Deed of Sale from mdlandrec.com (free service) you can access the Deed and use the actual close date to begin your clock to 91 days before ratification.  This prevents a slow moving Title Co from delaying your settlement.  Ratification only counts when the Seller signs so Buyer could technically sign their half prior to the 91st day.

Hope it helps!

We don't record before disbursing in Maryland. And, depending on volume, it can take the county clerks days or even weeks to get instruments on record. Throw in rejections and that turns into months.

As you might imagine there is a lot than can happen in the "gap" and a lot of title claims as a result.

I would argue that the relevant date is the settlement date, not the recording date.

Originally posted by @Adrian Jones :

@Will Barnard maybe you can help me here. I closed on December 15, 2017.  The deal was in the state of Maryland. Now when I go to the SDAT Real Property Search website for Maryland and look up my property, under the "Transfer Information" portion of the page, it shows a date of 01/16/2018. So my assumption is that 01/16/2018 is the date it was recorded. 

I see. Different than CA, however, @Brad Smith above gave a great answer and the settlement date should be the date of record for the FHA rule. (I would confirm that with FHA to be sure). In which case, you are fine.

Originally posted by @Will Barnard :

If you closed on Jan 15th, why would the deed be recorded a month later? The day I close is the day of recording here in CA. 

 One county in Maryland files the deeds electronically and so its recorded the day of sale. The rest of the counties are done at the pace it takes the county to get it done. Some of them can be up to a couple months or more. I just bought a new place Dec 27th and my deed isnt recorded yet almost 2 months later still. I just happen to keep monitoring as I cant apply for my homestead til after my deed is recorded.

Also, 91st day from when it was sold it can go under contract. It doesnt need to be from when the deed was recorded. 

If you tell us where the property is and price point, we might be able to tell you whether an FHA loan is likely.

@Adrian Jones We can approve client on basis of credit, assets and income but not appraisal. FHA case number assigned to property so can't submit full file unless 90 days pass.

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