FHA – Flipping Rule Waiver If Value Increased More Than 20%

For property sales prices that are 20% or more above the Seller’s acquisition cost the following must be performed:  Keep in mind that if the value increases by 100% or more, a second appraisal is required:

• Appraiser must indicate the Seller completed legitimate renovation, repair and rehabilitation work on the subject property to substantiate the increase in value. 
• If the work was not performed, Appraiser must provide appropriate explanation of the increase in value since prior title transfer;

AND

• The Lender processing the loan must order a property inspection report and provide a copy to the purchaser prior to closing. Cost of this inspection may be charged to the Borrower.  The inspector must not have any interest in the property or relationship with the Seller and may only be compensated by the Lender.  The inspector may not compensate any one for the inspection referral or be compensated for making referrals or recommending contractors to perform any repairs recommended by the inspection.  Property inspections must include, at a minimum, the following:
• Structure, including foundation, floor, ceiling, walls and roof;
• Exterior, including siding, doors, windows, appurtenant structures such as decks and balconies, walkways and driveways;
• Plumbing, electrical and heating and cooling systems;
• All interiors, all insulation and ventilation systems, as well as fireplaces and solid-fuel-burning appliances. 

None of the current changes has stopped Mid Florida Investment Properties from buying properties, rehabbing and  selling for more than the 20% acquisition price. It will be business as usual. We have always liked the ugly houses and those will be the homes that are easier to substantiate the increase in value.