The Federal Housing Administration (FHA) established the Anti-Flipping Rule to protect homebuyers using FHA loans from inflated prices caused by rapid, speculative resale of properties—often called “flipping.” This rule mandates a minimum “seasoning” period during which the seller must own the property before it can be financed with an FHA-insured mortgage.
How Does the FHA Anti-Flipping Rule Work?
The rule hinges on how long the seller has held the property before resale:
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0 to 90 Days: FHA financing is not allowed for properties resold within 90 days of the seller’s acquisition. This prevents quick flips where investors buy and resell homes for quick profit, often without significant improvements.
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91 to 180 Days: FHA loans can be used but may require additional scrutiny. If the resale price is double (100% or more increase) compared to the seller’s purchase price, a second independent appraisal is required to verify the home’s value and justify the price increase. If justified by documented substantial renovations, the higher appraisal may stand.
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Beyond 180 Days: The antimarket flipping restrictions no longer apply. FHA loans can be issued under standard appraisal rules.
Why Is the Rule Important?
- Homebuyer Protection: It shields buyers from overpaying for homes resold quickly at inflated prices without significant value added.
- FHA’s Financial Risk: By preventing loans on inflated properties, the FHA reduces its risk when refunds become necessary if borrowers default.
- Market Stability: The rule helps keep local housing markets stable by curbing speculative price spikes.
Exceptions
The FHA recognizes exceptions to the 90-day rule, including:
- Sales of bank-owned properties (REO)
- Government agency resales (HUD, Fannie Mae, Freddie Mac)
- Inherited properties
- Employer or relocation agency sales
- Sales by government-approved nonprofit organizations
Frequently Asked Questions
Can HUD waive the FHA Anti-Flipping Rule?
Yes, temporary waivers may be issued during disaster recoveries to help restart housing markets.
How can I verify the seller’s ownership length?
Your real estate agent can check public records or MLS history.
What if major renovations were done?
A second appraisal documents and justifies price increases when substantial repairs or upgrades have occurred.
For FHA loan details, see our FHA Loan glossary article and for more on appraisal requirements, visit FHA Appraisal Guidelines.
For official source details, visit the HUD Handbook 4000.1 and review FHA policies at HUD.gov.
This rule plays a crucial role in helping first-time FHA buyers avoid pitfalls associated with rapid home flipping and inflated prices, supporting safer, more stable real estate transactions.
