If you are buying a house that someone else bought, rehabbed, and relisted, and your lender has just told you a second appraisal is required, this is almost certainly why: the price you agreed to pay is far enough above what the seller paid, soon enough after they paid it, to meet the program's definition of a flip.
The Fiirm's DSCR program — our 1-4 unit residential investor loan, qualified on the property's rent rather than your personal income — defines a flip with two arithmetic tests. Both compare your contract price to the seller's acquisition price, and both turn on how many days passed between the seller acquiring the property and the date of your purchase agreement.
More than a 10% increase within 90 days is a flip. More than a 20% increase at 91 to 180 days is a flip. If either test is met, a second appraisal is required, along with several other conditions that most buyers do not see coming.
The two tests, in the guideline's own terms
Here is the definition as it is written.
Read the moving parts carefully. Each is a place where deals get miscategorized.
The comparison is contract price against the seller's acquisition price — not against the appraised value, not against the seller's total cost with the rehab included. What the flipper spent on the roof does not enter this test. A seller who paid $240,000, put $70,000 into the house, and is asking $330,000 is 37.5% above acquisition, no matter how real the renovation was.
The clock runs from the seller's acquisition date to the date of your purchase agreement — not to your closing date, not to the note date. The day you sign the contract is the measuring point. Two identical deals can land on opposite sides of the line because one buyer signed on day 88 and the other on day 92.
The thresholds are more than 10% and more than 20%. Exactly 10% inside 90 days does not meet the first test as written.
| Days from seller's acquisition to your contract date | Increase over seller's acquisition price | Meets the flip definition? |
|---|---|---|
| 90 or fewer | More than 10% | Yes |
| 90 or fewer | 10% or less | No |
| 91–180 | More than 20% | Yes |
| 91–180 | 20% or less | No |
| 181 or more | Guideline states no threshold for this window | Neither test applies |
That last row deserves a caveat. The guideline defines a flip using those two tests and no others, so a contract dated more than 180 days after the seller acquired the property cannot meet either one. But "not a flip by definition" is not "no further questions" — other requirements in the program still apply on their own terms.
What happens once the deal is a flip
The guideline does not decline flips that meet the definition. It attaches conditions. There are eight of them, and the second appraisal is only the first.
The condition that surprises buyers most is not the appraisal. It is the renovation documentation. If the value increase is attributed to work performed, the file wants the receipts — contracts, specs, invoices, lien waivers. Many flippers treat their cost basis as proprietary and will not hand it over. Have that conversation before you are 20 days into a 30-day contract.
The second condition that bites is seller must be owner of record. Wholesalers assigning a contract they never closed on do not satisfy this. If the person selling you the house does not appear on title, the deal as structured does not meet the requirement.
The second appraisal: what it is and what the guideline does and does not say
A second appraisal here means a second full appraisal report, not a desk review or a value-check add-on to the first. The program's general appraisal rules tell you a great deal about how it is handled.
Three practical consequences follow directly.
You cannot reuse the flipper's appraisal. Sellers of rehabbed houses often have a recent one in hand, sometimes ordered to support their list price. Re-use of a prior appraisal is not permitted regardless of its date, and borrower-ordered appraisals are not acceptable. It cannot be either of your two reports.
Both reports must be interior appraisals on the standard forms. The valuation criteria call for interior appraisals on the Fannie Mae forms for 1-4 family properties — 1004 for a single unit, 1073 for an individual condo, 1025 for 2-4 family — plus a market rent comparable schedule on the 1007 or 1025. Two appraiser visits, to a property the seller may still be finishing.
The second appraisal has to exist before the note date. The guideline is explicit that it must be dated prior to loan consummation. It is not a post-closing cleanup item, and it is not waivable by closing first.
On who pays for the second appraisal: the guideline is silent. It requires that a second appraisal be obtained and a copy provided to the borrower. It does not assign the cost, and it does not say the fee is credited, split, or absorbed. In practice this is negotiated at the transaction level, and any seller contribution has to be handled under the program's interested party contribution and seller concession rules, which are separate from the flip section. Ask before you assume, and ask in writing.
The guideline is silent on several other mechanics people expect it to address. It does not say the two appraisals must be performed by different appraisers or through different AMCs. It does not say the lower of the two values governs. It sets no tolerance for how far apart the values may be, or what happens if they diverge sharply. There is a separate appraiser-rotation rule — a single appraiser cannot be used for more than three out of every five consecutive valuations in any specific county or for any one borrower, guarantor, managing member or related party — but that is a general independence control, not a second-appraisal rule. Do not assume it dictates how your two reports are assigned.
There is a tension in the guideline worth knowing about
The valuation criteria under Appraisal Requirements state flatly that flipping is not acceptable and that the lender must ensure the property is not being flipped. The Property Flips section, added in September 2025, then defines what a flip is and sets the conditions under which one proceeds.
Both statements are in the same document. The practical reading is that a flip meeting the definition and satisfying all eight conditions is a documented transaction, and a price increase nobody can explain is not. This is a place where the file draws underwriter attention rather than automatic clearance. A documented rehab with receipts, appraiser commentary, recent comparables, a clean chain of title and an arm's-length seller of record is a very different submission from a 45-day, 30% markup with no paper behind it — even though both are "a flip."
Why a higher second appraisal may not raise your loan amount
Buyers sometimes hope the second appraisal comes in high and unlocks a larger loan. On a purchase, that is usually not how the math works.
On a new acquisition, loan-to-cost is in play, and your cost basis on the day you close is essentially what you are paying plus your documented closing costs. An appraisal that comes in $40,000 above your contract price does not add $40,000 of borrowing capacity, because the loan is constrained by the lesser of the two measures. The appraisals on a flip exist to validate the value, not to expand the loan.
The corollary matters for your exit plan. If you intend to refinance out of this purchase later, note that where a property is owned less than six months the program uses purchase price as value instead of appraised value, with a narrow exception where the loan amount is no more than the cost of the property plus all documented renovation costs. Buying a finished flip and refinancing at a higher value 90 days later is not a plan the guideline supports.
What to check before you go under contract on a rehabbed house
All of this is checkable from public records, the listing, or one call to the listing agent — and cheaper to learn before you sign.
Pull the seller's deed date and price. County records give you the acquisition date and, in most jurisdictions, the price or the transfer tax from which price can be derived. Run the two tests yourself. If you are at 12% on day 60, you know a second appraisal is coming.
Count days against your realistic contract date. If the seller acquired 85 days ago, signing on day 92 rather than day 88 moves you from the 10% test to the 20% test. That is not gaming anything — it is knowing which test applies.
Count transfers over the last 12 months. A pattern of previous flipping, evidenced by multiple transfers in the last twelve months, is disqualifying under the flip conditions. Two deeds in a year on one parcel is a question you want answered before contract.
Confirm the seller is on title. If you are dealing with an assignor rather than the owner of record, the structure does not meet the requirement.
Ask for the renovation file up front. Contracts, specs, receipts, invoices, lien waivers. Put it in the contract as a seller deliverable if you can. This is the condition sellers most often refuse late.
Check finish quality against the program's condition floors. Properties with a condition rating of C5 or C6, properties that are not lease ready, and properties with a construction rating of Q6 are ineligible; the valuation criteria also state that properties in fair condition are ineligible. A half-finished rehab the seller promises to complete after closing is a real risk, because the appraiser rates what they see.
Check permits on the work. The appraisal must confirm that any additions or conversions were completed according to code, or a recent certificate of occupancy must validate that code requirements were met. Unpermitted bedroom additions and garage conversions are common on flips and are a frequent late-stage problem.
Run the property-type screens. No rural locations as defined by the CFPB rural designation tool or as identified as rural on the appraisal. No parcels over two acres. Nothing out of compliance with local zoning. No manufactured or modular homes. Not flip-specific, but flips cluster where these matter.
Plan for a vacant property. Most flips deliver empty. On a purchase, gross rent for the DSCR calculation comes from Appraisal Form 1007 at 100% of gross market rent, so a vacant house is not itself a problem for qualifying — but the unit must be in lease-ready condition. The 5% LTV reduction for unoccupied or unleased long-term rentals applies to refinance transactions and does not apply to purchase transactions.
This is not the FHA 90-day rule
Almost everything written online about buying a flipped house describes the FHA property flipping restriction — a rule of the Federal Housing Administration governing FHA-insured owner-occupant mortgages — plus the CFPB consumer material around it.
Those are other agencies' rules and they do not govern this program. FHA's restriction has its own structure, exemptions and second-appraisal triggers, none of which are reproduced here, and Fannie Mae and Freddie Mac treat recently-acquired properties separately again. If you have been reading about a 90-day prohibition and assuming it applies here, set it aside. The thresholds above are the ones your DSCR file is measured against.
Seeing it coming next time
The habit is small: before offering on anything that looks recently renovated, pull the deed. Acquisition date, acquisition price, transfers in the last year. Thirty seconds of county records tells you whether a second appraisal is coming, which window you are in, and whether the chain of title has a pattern in it.
If the deal is a flip, that is fine — the program has a defined path for it. What you cannot do is discover the path with eleven days left on your financing contingency. Send us the deed date and the contract price early and we will tell you which test applies before you sign.
What this page does not do
This page does not price your loan, approve your file, or tell you what your specific transaction will require. The thresholds and conditions above are quoted from The Fiirm's DSCR program guidelines, version 28, effective 5/1/2026, and guidelines change; a later version may read differently.
It does not tell you who pays for the second appraisal, because the guideline does not say. It does not tell you whether the two appraisals use different appraisers, whether the lower value governs, or how a large divergence between the reports is resolved, because the guideline does not address those either. Where the document is silent, we said so and stopped.
It does not cover FHA, Fannie Mae, Freddie Mac or any other agency's treatment of recently-acquired properties.
It is not legal, tax or investment advice, and it is not a commitment to lend. Underwriting is manual on this program and files are assessed on their own facts. If you are under contract right now on a rehabbed house, the fastest way to a real answer is to send us the purchase contract and the seller's deed.
Guideline DSCR V28 · Reviewed August 31, 2026
Published August 31, 2026 · Updated August 31, 2026
How to use this guide
This article is educational guidance, not an offer or commitment to lend. Rules, property facts, credit, leverage, documentation, and full underwriting still control any actual scenario.