Baltimore Real Estate Investing Blog

Inman news is reporting that FHA has temporarily removed the 90 day seasoning requirement for properties that they finance. I agree with the article, this won’t really help the backlog of foreclosed homes. Of course I didn’t think the original rule did much to address the real issue with “Flipping”. Seasoning requirements are a real impediment to legitimate wholesale or rehab deals.

What is Seasoning

Many lenders require that a property be owned for a certain period before they will finance it. This is to avoid the fraud and “Illegal Flipping” schemes where homes are quickly resold for substantially more than they are worth. FHA had a 90 day requirement. They also had tougher standards for 91 to 180 days.

So How Does that Affect Investors

Seasoning restrictions are a real problem for investors.  Obviously every home we buy and resell is for substantially more than we pay. The problem is we can have trouble selling a property because our buyers will have trouble getting financing. Not all lenders are FHA, and not all lenders have seasoning requirements, but if you are not aware of this issue you can see you sale die at the last minute.

If you are an investor and selling a property you have held for less than a year you should get involved with your buyer and their lender and make sure that seasoning will not be an issue.

Update:

Since first posting this I have learned that the FHA 90 day rule rollback only applies to lenders who have foreclosed. It does not apply to Properties that investors buy. See FHA Update

Happy investing,

Ned