Perch, Open-door and the FHA Buyer
Here's something no one is talking about: FHA buyers and homes that are owned by Perch, Opendoor or companies like this. They don't go together.
With so many homes being bought and sold by companies like these above, there is one certain class of borrowers that are being left out: FHA buyers. Why? Because of the 90 day flip rule that FHA has in place.
FHA guidelines state:
Re-sales Occurring 90 Days or Less Following Acquisition
If a property is re-sold 90 days or fewer following the date of acquisition by the seller, the property is not eligible for a mortgage insured by FHA. FHA defines the seller’s date of acquisition as the date of settlement on the seller’s purchase of that property. The re-sale date is the date of execution of the sales contract by the buyer that will result in a mortgage to be insured by FHA.
As an example, a property acquired by the seller is not eligible for a mortgage to be insured for the buyer unless the seller has owned that property for at least 90 days. The seller must also be the owner of record.
Basically, if you have a client that is or if you are an FHA buyer, you cannot even write a contract on a home that has been previously sold until 91 days have passed since the last title transfer. In today's crazy market, most homes don't even stay on the market for 90 days! Companies like these very unknowingly are taking a huge segment OUT of the market for their homes (I am sure it was not the intention). I know that they are not "house flippers" but under the FHA rules, they are. Ugh.
Basically, the only mortgage financing that is allowed when you have a seller like Perch etc. are conventional and VA. FHA peeps need to wait until 91 days have passed before they even think about it. IF the home is still on the market.
Why does this stink so bad? Well, its the demographic of the homes that these companies are buying.
- Homes in non-gated communities
- Homes that are generally cheaper in price
I think that one day, FHA might change its rules, but for the time being, FHA buyers are kinda getting hosed. They have to either get re-approved for a conventional loan with potentially less favorable terms (if they have a lower credit score) or just find a different home.
Realtors beware!! Please be cognizant of who the seller of the home is when you do have an FHA buyer because there is nothing worse than falling in love with a home that you cannot have :(
And THAT is my PSA for today!