This temporary waiver of the rule should help legitimate investors who can rehab a property quickly without imposing an arbitrary timeline before they can sell again. In some cases, this has held back investors looking at buying a low-priced foreclosure "as is" that could be fixed up and sold again quickly due to the additional costs associated with sitting on the property for a time - or alternately - if a rehab was well done and priced to sell quickly, then buyers eligible for an FHA loan were effectively eliminated from bidding on the property.
While this change will help in certain situations, there are still some constraints a potential investor has to consider, including:
- Transactions must be arms-length, i.e., the buyer and seller must be unrelated
- A new requirement has been added that if the sales price is 20% more than what it was bought for previously, it requires supporting documentation of improvements, and possibly 2 appraisals.
- It is not applicable to "reverse mortgages" (or an HECM mortgage as it is officially referred to).
Click here to see the full FHA press release.