HUD Information

HUD defines 2 Buyer Types:

• Owner Occupant
• Investors

Owner Occupants:

• Are given piority during certain cycles.
• Must occupy the home for 1 year.
• CANNOT participate in a HUD sale for 2 years after the purchase.

Investors:

• They CANNOT bid until day 31.
• They have no restrictions on quantity of purchases.
• Must wait 90 days before flipping/selling the property.

Property Condition Codes

• F - Flood Zone - Property is located in an area where coverage under the National Flood Insurance Program may be required to obtain a loan.
• HOA - Homeowners's Association - Property is covered by a Homeowners' Association which will most likely require HOA fees and dues to be paid by the home occupant.
• LBP - Lead Based Paint - Property was built before 1978 and may contain lead based paint: LBP addendum form must accompany the sales contract.

LBP Stabilization

• Stipulations for HUD to complete a LBP assessment:

        - built before 1978

        - owner-occupant

        - FHA financing

• Requests made to Field Services Manager for inspections through Asset Manager via P260 at contract execution.
• HUD will fund up to $4,000
• For stabilization exceeding $4,000 HUD will (at their sole discrection):

        a) cancel the sales conrtract and buyer  receives 100% of earnest money back.

        b) allow to change financing to 203k, conventional,

            or 203k streamline (only if less than $5,000).

Financing Codes:

• IN - Insurable - property meets FHA 203B financing requirements; no obvious repairs necessary to insure an FHA loan to buyer.
• IE - Insurable with escrow - property eligible for a 203B FHA loan; necessary repairs total less than $5,000.  110% of the cost of the repairs are added into the loan.  The sales price remains the same.  No repairs are done prior to closing.
• UI - Uninsurable - property requires more extensive repairs after the close of escrow and is not eligible for FHA mortgage insurance in the property's "as is" condition.  Home can qualify for FHA 203k buy and repair program if repairs do not exceed $35,000.  The FHA 203k program usually has an interest rate about 1/2 to 3/4% higher than the normal rate and requires a middle credit score of 640.  The repairs must be done after closing within 1 to 4 months, depending on lender.  The repairs for the 203k program cannot be for major structural, pools, fences and landscaping.

Bidding on HUD Homes

• Most HUD homes that are in decent condition sell for full price or above. 
• If the buyer wishes to bid above full price, the additional amount above full price must be paid in cash at closing.  Pemco will notify you if you overbid and requires submission of proof of funds, the overbid amount cannot be financed.
• A HUD registered agent must submit a  bid for the buyer.
• Owner occupants receive priority for the first 30 days.  After 30 days, investors are allowed to bid on HUD homes.
• Bids can be submitted 24/7, but are not reviewed on weekends or holidays.
• The daily bid deadline is 11:59 pm.
• If Pemco receives 2 acceptable bids that are the exact same amount, they will select the winner by a randomized electronic drawing.
• If you place a bid you wish to withdraw, you must cancel the bid prior to the day's bid deadline.
• The "as is" value = the appraised value.  You cannot get a 2nd appraisal when using FHA.
• HUD will allow up to 3% the purchase price of the property to go towards closing costs.

Earnest Money

• Must be in certified funds.
• Must be $500 for sales price below $50,000
• Must be $1,000 if sales price is $50,000 or above.
• Investors will not get their earnest money back if they cancel the contract.
• The earnest money must be made payable to HUD and remitted with sales contract to Pemco.  Pemco will send earnest money to closing attorney.
• May be entirely, or partially forfeited or refunded if contract fails to close.

FHA Amendatory Clause

• HUD properties are exempt from this clause.

Note on minimum loan amounts.  Most lenders have a minimum loan amount which is usually around $50,000.

HUD Review of Offer

• On the bid deadline day, all offers are review and accepted, rejected or counter-offered.
• HUD may do a counter offer, especially if there are multiple bids.
• Bids are usually posted at Noon the day after the close of bidding.

Bid Accepted

• The entire package must be received at Pemco's office within 2 days of notification.
• Pemco will sign off on the contract and forward it via email to the buyer's agent and the closing attorney. This date is the acceptance date.

Home Inspection

• buyer will be given a 15 day due diligence to get all inspections on property completed.
• The Field Services Manager (FSM) must authorize your home inspection.

        - Cannot begin process until contract is signed.

        - You have 48 hours to complete the inspection after the last utility is turned on.

        - You must turn off the utilities after the inspection is complete. 

        - No repairs can be done until after closing.

Closing

• You must close within 30 to 45 days of contract acceptance, unless doing a 203k loan.  203k loans are given up to 60 days.

**********************************************************************

Some of the new listings are offered to HUD's Special Programs before being offered to the public.

HUD's Special Programs

• Good Neighbor Next Door 
• HUD approved  Non-profit/Govt Agency

Good Neighbor Next Door Program

1. This program is designed to enhance urban communities by offering discounts on HUD homes to Firefighters, EMT's, Police, and Teachers.
2. Buyer gets 50% off the property list price.
3. $100 down payment.
4. Requirements

• Property must be located in a designated Revitalization Area
• Buyer must live in the home for at least 36 months
• Buyer nor spouse may not have owned title to property in the last 12 months.
• Bidder nor spouse cannot have ever before participated in GNND program.

   3.  Buyer must bid 100% of the listing price.

   4.  Buyer can utilize any type of financing or cash deal.

   5.  FHA financing on GNND

• Must qualify for entire contract amount prior to discount.
• Buyer can finance into the mortgage all reasonable and customary closing costs, including pre-paids and real estage commission.

   6.  Hud will not pay any closing costs or real estate commission for this program.

   7.  These homes rarely come on the market, so do not count on it.

***********************************************************************

HUD's Homeownership Incentives:

• $100 down payment
• $1,000 sales allowance

$100 down payment:

• The $100 down payment is available to owner occupants who purchase a HUD home with FHA financing.
• The buyer is still responsible for earnest money deposit.

$1,000 Sales Allowance

• This is paid to owner occupant buyer who goes under contract on a HUD property within the first 30 days on the market.
• $1000 appears as a credit on the HUD-1.
• There is no need to mark the contract with this sales allowance.