If you're a Veteran looking at recently purchased properties, you might wonder whether the 90-day flip rule applies to VA loans. This rule exists to prevent property flipping fraud, but understanding how it affects VA financing can be confusing. VA loans are not subject to the traditional 90-day flip rule that applies to some conventional loans, but the VA does have anti-flipping regulations that require properties to have been owned by the seller for at least 90 days before the sales contract date.
Understanding these requirements helps you navigate purchases of recently acquired properties without unexpected complications. This guide explains exactly how flip rules work with VA loans and what you need to know when buying a property that was recently purchased.
What is the 90-Day Flip Rule?
The flip rule was created to combat property flipping schemes where sellers buy distressed properties, make cosmetic improvements, then quickly resell them at inflated prices to unsuspecting buyers.
The goal is to prevent fraud and protect homebuyers from overpaying for properties that haven't genuinely increased in value.
VA Loan Anti-Flipping Requirements
The VA doesn’t have a specific 90-day flip rule like the FHA does. However, the VA does enforce anti-flipping and anti-fraud safeguards through its underwriting, appraisal, and occupancy requirements, and VA lenders and appraisers may flag recently resold or cosmetically renovated properties for extra scrutiny.
The Basic VA Requirements
The seller must have owned the property for at least 90 days before the date of the sales contract. This is measured from when the seller acquired legal ownership (usually the recording date of their deed) to the date you and the seller sign the purchase agreement.
Notice this is calculated from the contract date, not the closing date. This distinction matters when timing your purchase. If the seller's deed was recorded on January 1st, you'll need to wait until April 1st or later to sign the contract.
Why the VA Has This Requirement
The VA wants to ensure the property's sale price reflects genuine market value rather than artificial inflation from fraudulent flipping schemes. By requiring a minimum ownership period, the VA makes it harder for bad actors to quickly flip properties for unjustified profits at Veterans' expense.
This protection serves you. It's designed to ensure you're not overpaying for a property that was bought cheap, given a quick cosmetic makeover, and resold at an inflated price within days or weeks.
Exceptions to the VA Anti-Flipping Rule
Several exceptions allow purchases of properties owned less than 90 days.
Properties sold by builders or developers: New construction homes are exempt from the 90-day requirement. If you're buying a newly built home from a builder who constructed it, the 90-day waiting period doesn't apply.
Properties acquired through inheritance: If the seller acquired the property through inheritance, the 90-day rule typically doesn't apply. Inherited properties often need to be sold relatively quickly to settle estates. Documentation showing the inheritance (like probate documents or death certificates) helps establish this exception.
Properties acquired through employer relocation: When sellers acquired the property as part of an employer relocation assistance program, exceptions may apply. Large companies sometimes purchase employees' homes as part of relocation packages, then resell them. Documentation from the relocation company establishes this exception.
Properties acquired through foreclosure, bankruptcy, or divorce: Properties the seller acquired through foreclosure, short sale, bankruptcy settlement, or divorce decree may be exempt from the 90-day requirement. This may require court documents or settlement agreements as documentation.
Properties with documented improvements: In some cases, if the property is being resold within 90 days at a significantly higher price but substantial improvements were made and documented, a second appraisal might justify the increased value.
Red Flags in Recent Property Purchases
When buying a property the seller recently acquired, watch for warning signs that might indicate problematic flipping.
A dramatic price increase over the seller's recent purchase price without corresponding improvements suggests potential overvaluation. If the seller recently paid a certain amount, and is now asking for substantially more without evidence of significant renovations, question whether the price is justified.
Cosmetic improvements only (like paint, flooring, and fixtures) without addressing major system or structural issues can point to superficial flipping. It’s essential to check foundations, roofs, and internal systems like plumbing and electricity, even if a house looks great cosmetically.
Pressure from the seller to close quickly or waive inspections is a clear red flag. Legitimate sellers usually won’t need to rush transactions or discourage due diligence.
Protecting Yourself When Buying Recently Purchased Properties
Even when a property meets the 90-day requirement or qualifies for an exception, take steps to protect yourself.
Always Get a Home Inspection
Never waive your home inspection, especially on recently purchased properties. An inspector can identify issues you may not spot. While the VA doesn't require inspections, it is a good idea to protect your interests.
Review the Property's History
Request a property history report or search public records to understand the property's ownership history and any issues that might have occurred. Look for patterns of quick flips or frequent ownership changes that might indicate problems.
Check for permits on any recent work. If the seller claims significant renovations, verify that proper permits were pulled and inspections completed. Unpermitted work can create problems with insurance and resale.
Scrutinize the Appraisal
The VA appraisal serves several purposes: establishing market value and ensuring the property meets Minimum Property Requirements. Pay attention to the appraiser's comments, especially regarding recent sales and the condition of improvements.
If the appraisal seems high relative to comparable properties or the seller's recent purchase price, ask your lender questions about the valuation.
Work with Experienced Professionals
Use a real estate agent familiar with VA loans. Experienced agents can spot potential issues and guide you away from problematic transactions.
Documentation Requirements
When purchasing a property that was recently acquired by the seller, expect to provide additional documentation to your lender. Your lender will need to verify when the seller acquired the property, typically through a copy of the seller's deed or settlement statement showing the recording date.
Supporting documents if claiming an exception:
- Probate records for inherited properties
- Corporate relocation documents
- Foreclosure or bankruptcy records
- Documentation of substantial improvements with receipts and permits.
Making Smart Decisions About Recently Purchased Properties
When you find a property you love that was recently purchased, work with your lender to determine whether the 90-day requirement is met or if a legitimate exception applies. Conduct thorough due diligence regardless of how long the seller has owned the property. A good home inspection and careful review of the property's history can reveal issues that might not be immediately obvious.
Patience often pays off. Waiting a few extra weeks for the 90-day requirement to be satisfied is a small price for the protection these regulations provide. There will always be other properties if a particular deal doesn't work out, but finding the right home at a fair price is worth the wait.
If you have questions about the anti-flipping rule or need clarification about your specific situation, visit the VA's housing assistance page or consult with an experienced VA lender who can review your circumstances and explain how these requirements apply to your purchase.
Read more about VA loans to explore your options and work with professionals who understand how to navigate these requirements successfully.
FAQs
Can I make an offer before the 90 days are up?
You can make an offer and negotiate terms before the 90-day period expires, but you cannot sign the purchase agreement until the requirement is met. Many buyers and sellers use this time to negotiate terms, arrange financing, and prepare for closing so they can move quickly once the 90 days pass.
What if the seller purchased the property 80 days ago but made significant improvements?
The 90-day requirement still applies unless the seller qualifies for a specific exception. Significant improvements alone don't automatically waive the requirement, though they might support a second appraisal justifying a higher sale price.
Can the seller manipulate dates to make it appear they've owned the property longer?
An attempt to manipulate dates or falsify documents is fraud and illegal. This can result in loan denial, loss of VA eligibility, and potential criminal charges for all parties involved.
What if I'm buying a foreclosed property directly from a bank?
Properties acquired through foreclosure typically qualify for an exception to the 90-day requirement. Banks regularly sell foreclosed properties quickly as part of their normal business operations.
