90 Day Rule Lifted – Part 2
Many of you heard FHA suspended it’s 90 day seasoning rule. A few questions I get regarding this issue:
1. What is the 90 day rule?
2. Why 90 day seasoning on flips?
3. What caused the rule to be suspended?
Let me explain-this is critical information for the real estate investor.
The federal government created a 90 day seasoning rule to combat illegal “flips”. This is where an investor purchases a property in foreclosure, then sells to a new FHA borrower at an inflated price. (No work done to home, just a price increase) Borrower gets loan and then defaults. FHA is then left holding a bad mortgage. Realtors, lenders, and appraisers were usually all working together to create this illegal flip. So, to curb this activity, FHA created the 90 day rule. This allowed everybody time to look into history of the home.
Why did they suspend this rule? Simple- the market is saturated with short sales and foreclosures. Buyers looking for nice, clean, easy to purchase homes are in short supply. Yes, there are very few homes that “regular” buyers can purchase. The illegal activities of the past have been corrected for the most part. Realtors, lenders, and appraisers are not able to work so closely together. (Federal regulations were put in place last year that keep this from happening- and I think this is a great thing!)
FHA buyers looking for homes today have little selection and as a result of this issue the government lifted the rule and opened the door for honest investors. This is a time to go out and purchase a spectacular deal, fix up and resell for a nice profit. The “regular” buyer needs us right now.
By suspending the rule, real estate investors are able to add supply to the marketplace.
Low supply + high demand = perfect market!
Tags: Chase Real Estate, christian chase, foreclosure illinois
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