Till recently, the rules for buying and selling FHA houses has prevented real estate investors from making quick flips. The intended result was to keep the market pricing from rapidly increasing.  However, in an effort to make foreclosure properties more attractive to investors and put more houses on the market for first-time buyers, the government has lifted the rule that prevented FHA mortgage homes from being resold within 90 days.

There is still a waiver with conditions in place to prevent investors from reselling the house within the 90 day period at 20 percent higher price than paid. The seller will be required to show justification for the increase by showing proof of expenses for repairs and renovations.

There are differing opinions as to the affects investors have on the real estate market. Some feel they do the community a service by buying, fixing up and reselling or renting properties that have been foreclosed. In many cases, investors also have the ability to finance prospective home-buyers that are unable to get financing otherwise.

Others feel that investors have unfair advantage over first-time buyers because they have a cash flow that allows them the ability to buy properties from banks. Since banks aren’t in the business of real estate inventory, cash purchases are more attractive over first-time buyers who have small down payments and need financing.  This may keep borrowers with FHA mortgages from getting affordable decent housing.  However with the high number of foreclosure and REO properties available today, this is not a likely scenario.  

With the 90 day rule temporarily lifted by HUD, more investors will be able to purchase properties in areas dominated by current FHA buyers. It is a concern for some experts that this change of rules will also have banks rushing houses into foreclosure to empty their backlog for cash sales. This in turn may cause home prices to fall and could be detrimental for those who need to sell their investment properties quickly.

Regardless of who will be buying these properties, this move by HUD will make foreclosed properties attractive to both investors and first-time buyers and with any luck get the real estate market moving upward again.