So are you planning to buy a foreclosed home in San Jose with an FHA Loan? Foreclosed properties can be sold by 2 entities:

  1. Directly by the Mortgagee (The bank that held the mortgage), or
  2. By entities that purchase foreclosed properties either singly or in bulk for resale

FHA has a property flipping rule that says that the new owner has to own the property for 90 days before he/she can sell again. FHA on Friday 5/15/2009 extended it’s Property Flipping Waiver to 5/10/2010. Meaning, a bank can foreclose on a property today and can sell it tomorrow without waiting for the mandatory 90 days seasoning.

Note that this waiver doesn’t apply to category 2 – Entities purchasing foreclosed properties from bank and then reselling it.

So if you are a buyer buying any foreclosed property in San Jose or rest of the San Francisco Bay Area and plan to get an FHA loan; you need to do some homework. Ask your real estate agent to get you a copy of preliminary title report for the property. This documents shows the transfer of ownership(s) in recent past. If you find out that the bank has sold the property to another entity, wait for 90 days before you get into contract.

Fannie Mae and Freddie Mac have similar rules too about property seasoning. So make sure you talk to your real estate agent and loan professional to get more details on the foreclosed property before you make an offer.

Photo courtesy Sean Dreilinger @FLickr

** Since I wrote this post FHA waived the Flipping requirements temporarily through January 2011. Call me at 408.905.6261, 408.905.6261 or email me at if you want more details.**

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