Flipping a house, or reselling a property quickly after purchasing, isn’t illegal. Because so many house flippers committed mortgage fraud or used predatory lending practices, HUD, the U.S. Department of Housing and Urban Development, is trying to protect home buyers. HUD also seeks to halt appraisals at inflated prices. The agency believes that house flippers artificially inflated prices.
Effective July 9, 2006, HUD changed their lending regulations for new FHA financing. To keep wholesalers from making a quick profit, only the actual owner of a home can sell a home with FHA, Federal Housing Administration, financing. To discourage house flipping, homes sold within 90 days of purchase won’t be eligible for FHA financing, either. Additionally, houses selling for twice as much as the purchase price in the time period between 91 and 180 days after the last sale require additional valuation data in order to qualify for FHA financing.
The exemptions to this policy include HUD, Fannie Mae, Freddie Mac, lenders selling real estate owned (foreclosures), local or state housing agencies, nonprofits with HUD permission to purchase discounted real estate owned properties, inherited properties, and dwellings located in presidentially declared disaster areas.