We have been seeing “Flips” surface again lately. Flips are properties that are purchased and re-sold within 90 days. Lenders go by “contract date” and not close of escrow. Hence, if you buy a property on October 1st, your contract to re-sell it must be dated after January 1st, to avoid “flip” status.
Anytime a lender sees that title changed hands twice within 90 days, they will almost always deem the property a flip, irrespective of circumstances.
FHA no longer finances flips. Conventional financing allows for flips, but two appraisals are required. Jumbo lenders allow flips on a case by case basis, depending on lender.
One way to buy a flip but avoid flip status is to tie up the property with a preliminary contract, but then provide a new contract, a new escrow, a new prelim, and a new earnest money deposit after the flip period runs. The appraisal cannot be performed until after the flip period too. Everything associated with the transaction must have a date after the flip period runs to avoid “flip status.”
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