This is great news!! We are proud to announce that we can now close FHA purchases that are to be sold under the 90 day seasoning rule. This is good until February 11th 2011.
The best part is that we CAN go over the 20% increase in price!
The seller will have to show proof of receipts and the required 2nd appraisal must verify these repairs along with the value.
Here are the requirements for the standard FHA purchase under 90 days seasoning and also below the 20% increase. The requirements for above a 20% increase are below.
- All transactions must be arms-lengths, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
- The Seller holds title to the property.
- The transaction is not a simultaneous closing.
- The contract of sale for the purchase of the property is fully executed and dated between Feb.1, 2010 and Feb.1, 2011.
- LLC’s, corporations, or trusts that are serving as sellers were established and are operated in accordance with applicable state and Federal law.
- The LLC’s Operating Agreement or documentation that reflects membership in the LLC must be reviewed to determine the transaction is non-arms length to ensure the borrower is not affiliated with the LLC.
- There is no pattern of previous flipping activity for the subject property, as evidenced by multiple title transfers within a 12-month time frame (chain of title information for the subject property can be found in the appraisal report).
- The property was marketed openly and fairly, via MLS, auction, For Sale by Owner offering, or developer marketing (Not allowed, any sales contracts that refer to an “assignment of contract of sale,” which represents a special arrangement between seller and buyer).
Here are the guidelines when the property is over a 20% increase. It must have a 2nd appraisal and the seller will be required to pay for it.
Justifies the increase in value by retaining in the loan file a second appraisal which verifies that the seller completed sufficient legitimate renovation, repair, and rehabilitation work on the subject property to substantiate the increase in value or, in case where no work is performed, the appraiser provides appropriate explanation of the increase in property value since the prior title transfer; and
Orders a property inspection and provides the inspection report to the purchaser before closing. The lender may charge the borrower for the inspection. The use of FHA-Approved inspectors or 203(k) consultants is not required. The inspector must have no interest in the property or relationship with the seller, and must not receive compensation for the inspection from any party other than the lender.
Also, the inspector may not compensate anyone for the referral of the inspection.
Additionally, the inspector may not receive any compensation for referring or recommending contractors to perform any repairs recommended by the inspection. At a minimum, the inspection must include:
i. The property structure, including the foundation, floor, ceiling, walls and roof;
ii. The exterior, including siding, doors, windows, appurtenant structures such as decks and balconies, walkways and driveways;
iii. The roofing, plumbing systems, electrical systems, heating and air conditioning systems;
iv. All interiors; and
v. All insulation and ventilation systems, as well as fireplaces and solid-fuel-burning appliances.
I know that we have had to turn down many loans due to this seasoning issue but look forward to helping all of our Realtors close some more deals this year.
Please contact me if there is anything I can do to help or if you have any questions or concerns.
Tim Hart
239-910-5668
