HUD's anti-flipping rule (established under 24 CFR Part 203) prohibits FHA insurance on properties where the seller has owned the property for 90 days or fewer. The rule targets rapid, value-inflated resales in investor markets but affects any transaction where the seller is not a long-term owner.
The Day Count
The seller's ownership clock starts on the date their deed was recorded, not the date they signed the purchase contract. Count from deed recording to the date of the new FHA purchase contract (not closing). If the count is 90 days or fewer, FHA financing is prohibited with very limited exceptions. If the count is 91 to 180 days, FHA financing is permitted but may require additional documentation.
The 91 to 180 Day Window
When the seller owned the property between 91 and 180 days and the resale price exceeds the seller's acquisition price by 10% or more, a second independent appraisal is required. The second appraisal is ordered by the lender and paid for by the borrower. The lender must also document that the price increase is supported by improvements made to the property, local market appreciation, or comparable sales data. This is not a disqualifying condition; it adds friction and cost.
Exceptions to the 90-Day Restriction
- ✦HUD REO properties (sold directly by HUD)
- ✦Properties sold by Fannie Mae or Freddie Mac through their REO programs
- ✦Properties sold by lenders (bank-owned REO)
- ✦Properties acquired through inheritance or estate sale
- ✦Properties sold by state and local government agencies
- ✦Properties sold by HUD-approved nonprofits under specific programs
MLO Workflow
Before ordering an FHA appraisal on any property, pull title history. If the seller acquired the property within the past six months, calculate the ownership window and apply the appropriate rule. If the deal is in the 0-90 day window and no exception applies, redirect the borrower to conventional financing, which has no anti-flipping restriction.
Aria can walk through the FHA flip rule for any seller acquisition date and identify whether a second appraisal is required. Ask at vicariointel.com.
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