The HUD home sales process is different but once you understand it you will realize it is logical and easy! You will want to work with buyers who are interested in buying HUD homes. If you don’t invest the time in learning how to successfully sell homes…well you might end up like the agent in this video.
We get lots of questions from buyers and agents about the Good Neighbor Next Door program (GNND). People hear bits and pieces of the program and hope that it applies to them. If you do qualify, it most certainly is a program that you should consider participating in.
The purpose of the GNND Sales Program is to improve the quality of life in distressed urban communities by encouraging law enforcement officers, teachers and fire-fighters/emergency medical technicians, whose daily responsibilities represent a nexus to the needs of the community, to purchase and live in homes in these communities.
What you need to know:
Available to Teachers, Police Officer, Fire Fighters and Emergency Medical Responders.
Buyer can get a 50% discount off the HUD appraised value.
Homes are available in HUD designated revitalization areas.
Buyer must live in the home for a full 36 months as the buyer’s sole residence.
Must not have owned another residential property for the last 12 months.
Eligible Participants (Details)
Teachers
· Full-Time
· Pre-K – 12
· Employed at State-Accredited Public and Private Schools
· Serving Students From the Area Where the Home is Located
Police Officers
· Full-Time
· Employed by a Law Enforcement Agency of the Federal Government, a State, A Unit of General Local Government or an Indian Tribal Government
· Must be Sworn to Uphold and Make Arrests for Violations of Federal, State, Tribal County, Township or Municipal Law
Fire-fighters/ Emergency Responders
· Full-Time
· Employed by a Fire Department or Emergency Medical Services Responder Unit of the Federal Government, a State, A Unit of General Local Government or an Indian Tribal Government
· Serving the Area Where the Home Is Located
General Rules
· Earnest Money Is Required of 1% of the List Price (No less than $500 and No More than $2,000)
· Must “Bid” 100% of the List Price
· Offers Selected by Lottery Number – Not Net to HUD
· If Buyer Uses FHA Financing- May Get Their Loan for $100 Down Payment and may finance the cost of reasonable and customary closing costs
· Buyer Must Qualify for the list price (not just the discounted amount)
· Silent Second Mortgage will be Recorded
· Silent Second Mortgage Will be Reduced by 1/36th on the Last Day of Each Month of Occupancy
· HUD WILL NOT PAY COMMISSION OR CLOSING COSTS- Buyer must build those into financing or pay with cash.
There is also a helpful FAQ at HUD.gov to answer all of your questions on this program.
Most HUD homes have an exclusive period for owner occupants that lasts 30 days. The exception are the properties with uninsured status. These have a five day exclusive period. The way to know if your buyer qualifies is to look at the listing at HUDHomestore.com and see the Eligible Bidders category for the listing. This will identify whether the property is in the exclusive period or if it has been opened to all bidders. Then look at the Period Deadline date to see when the last day of the exclusive period will be.
Here is a screen shot from HUDHomestore. Please use this easy method to determine if a HUD home will work for your buyer type. You can click on the image in order to see a full size view.
A fairly significant percentage of the HUD 9548 purchase contracts submitted after a bid is accepted are rejected and the selling agent must make corrections in a short two business day window. One of the HUD asset managers, recently provided us with a list of the most common reasons for rejection of these contracts. To follow along, here is a link to the HUD 9548 purchase contract.
1. Buyer does not initial line 12 where Purchaser acknowledges the Seller can keep their earnest money deposit if the terms of the contract are not met.
2. Buyer name on the contract does not match the name on the bid.
3. Financing type on the contract should be based on the way the property was bid at HUDHomestore.com.
4. Lead Based Paint Addendum contains check marks instead of the Broker’s initials where required.
5. Often the Lender Letter does not indicate all the required items: loan type, loan amount, sales price, credit verified and a signature for the loan officer or name, title and contact information of loan officer.
6. Money orders or other certified funds for earnest money must be made payable to HUD.
7. Dollar amounts on line 5, 6a, 6b, & 7 do not match the bid amounts originally submitted at HUDHomestore.com.
8. The Buyer and/or the Broker signs in HUD’s space.
9. Authorization letter not included for agent to sign on behalf of the Broker. Check with the Listing agent as to what is required as this varies by Asset Manager.
10. Not following all the instructions on the correction email. Errors on the revised contract submission are subject to the contract being rejected and the property placed back for bid at HUDHomestore.com.
We are here to help you get your contract submitted correctly. If you are interested in understanding this process better, I strongly suggest you consider signing up for one of our monthly classes.
After your HUD sales contract has been approved/ratified by HUD, it is a contract with terms to be honored! I am still surprised at the number of sales agents who think these contracts can easily just have an amendment attached and keep the deal alive. The reasons amendments and changes are needed are many. Lets just get out on the table immediately, what is a “deal killer”…ie NOT amendable on these contracts.
· Sales Price
· Primary purchaser
· The amount of earnest money
· Closing Cost concession
· Net to HUD
· Sales agent commission paid by HUD
· Purchaser’s Social Security Number
· NAID Number used by Broker
· Moving from Investor to Owner or Occupant or Owner or Occupant to Investor
Recognizing that there are some issues that come up that do not break the spirit of the agreement, HUD does allow some items to be amended. First, go to the site of the HUD Asset Manager assigned the property to find the appropriate Amendment form and instructions.
A couple examples of real requests received for HUD contracts..and the result of the request.
If the bid states the purchaser is the Owner Occupant, this means this home will be their primary residence to be occupied by the purchaser for 12 months and the purchaser has not purchased another HUD home as an owner/occupant in the last 24 months. This status CAN NOT be changed and if needed, the contract will be cancelled. Even if the lender underwrites the loan for the owner-occupant as an investor loan, the contract will be cancelled.
Finally, HUD does not allow contingencies (ie inspections, home closings, cashing a big check etc.). A HUD contract is a contract with limited ways that it can be amended.
These are just the rules of the game. We do not write them. We do want you to understand them.
HUDHomestore.com offers a new feature that selling agents and home buyers are going to want to know about!
A new video has been posted to our YouTube channel with more information to help you get your arms around the process of selling a HUD Home.
Wilmoth Group offers classes for selling agents on how to successfully sell HUD homes. These classes offer several little-known tips that I share to assist agents in being HUD homes experts.
One of the issues that commonly is of interest is how to find HUD homes for investors. Most agents have heard that the owner-occupant preference period has been extended under the Marketing and Management III contract. There is some misunderstanding on this point, and it is in that confusion lies a golden opportunity for investors.
I will try and keep this simple. Come to a class to dig deeper into the details. Basically, HUD provides information for FHA buyers in each home’s listing that assists the FHA buyer in learnign if the home is approved for FHA financing or not. Homes that are approved for FHA financing can include properties that an FHA appraiser has identified up to $5000 of repairs. There is a process for the FHA buyer to complete those repairs and have FHA financing. If the HUD home does not qualify for straight up FHA or the $5000 repairs program (FHA 203B) then HUD places the letters UI in the FHA financing category on the listing.
The approved FHA (IN) and the 203B (IN w/Escrow) properties all have 30 days for owner occupant purchasers to have priority. No investor bids are possible until day 31. So one option for investors is to wait for these properties to hit day 31. From experience, not many of them do. They are priced well and the advantages for FHA buyers are too great.
It is the properties labeled for FHA financing as UI that you should search for investors. Look for the new ones that come on the market. It is possible they may have repairs that are as low as $5100-remember they did not qualify for the FHA 203B. Here is the kicker..HUD only has a five day owner occupant preference period for these properties! On day 6 of the listing for UI properties, investor bids are accepted.
Increasingly, banks and government agencies are making strong efforts to only sell to owner occupants. The game for investors has turned more to auctions and bulk sales. Bulk sales are for deep pockets. Here is a way the smaller investor can bid on properties shortly after they have hit the market. Combined with the possibility that the amount of repairs may not be substantial, this is the opportunity for your investors to participate in buying HUD homes.
As of December 1, HUD has changed the selling agent incentive plan that was available to agents in Florida and Indiana. The new incentive offers bonuses between $300 and $600 when properties close in 43 days or less. Another great reason to sell HUD homes!
You can read all the details of this change at our website including the requirements for how to document that you have earned the bonus. In general, we are finding that all HUD homes are ready to close in this time frame so the structure of this incentive places the burden on the selling agent and the buyers lender to perform. Something to consider when putting those bids together.
