Selling or Flipping a Property Shortly After Purchase

Is it true that you have to own a home for three months before you can sell it.

1 Answer

No, it is not true that you have to own a home for three months before you sell it. However, if you recently acquired a property and less than three months have elapsed since the acquisition, here are a few things you should know.

If your buyer plans on relying on an FHA-insured loan to finance the purchase, the deal will be a no-go. FHA will not insure a loan to purchase a property where a seller has held title to the property for less than ninety days as of the signing of the sales contract. If your buyer plans on obtaining conventional/conforming financing, there is no such outright prohibition. However, Fannie Mae underwriting guidelines call for much stricter scrutiny of such transactions.

"Why?" you ask..... Well, selling a property shortly after you acquire it is considered " flipping." While there is nothing wrong with flipping, in and of itself, Fannie Mae, Freddie Mac and the FHA have found that more often than not, flipping involves fraud. Realistically, there are very limited situations in which someone can acquire a property for a price less than its fair market value. As a result, being able to sell a property soon after you acquire it for a price high enough to make a profit and cover the costs of sale and acquisition is relatively unlikely -- especially in a slow market such as the one which exists today.

Unless you are adding value to a property by rehabbing it in order to sell it, it's probably best to stay away from the practice of flipping. Contrary to what the infomercials are touting, there are better ways of making money in real estate.