Brokers’ Guide to Selling HUD Homes

1
Brokers Guide to Selling HUD Homes
2
What is a HUD Home?

• If a loan is insured by the Federal Housing
  Administration and goes into default, the lender
  may submit a claim against the FHA insurance Fund
  and transfer ownership to HUD

3
Asset Management Changes

• Effective October of 2010, HUD awarded contracts
  to multiple Asset Management companies who market
  HUD properties
• A new website, www.HUDHomestore.com will have all
  properties available for bidding
• The appropriate Asset Manager (AM) for each
  property can be found under AGENT INFO

4
How to show and sell HUD Homes

• Licensed real-estate brokers who are registered
  with HUD may show and submit offers on behalf of
  buyers
• BROKER must register with HUD to receive a NAID
  number. The same NAID number is used by all
  agents within the brokerage. Process takes 6-8
  weeks to complete and must be renewed annually
• For more information and to register, please go
  to www.HUDHomestore.com

5
Listings and Selling Agent Account

• New listings are available daily and can be found
  at www.HUDHomestore.com
• You will need to create a Selling Agent Account
  at www.HUDHomestore.com prior to placing a bid
  for buyers. This requires the brokerages NAID
  number
• Go to the upper right corner and click bidder
  to register as a selling agent
• Brokers can also check the status of their bids
  at www.HUDHomestore.com
• This site is also available to the public to
  search for active listings

6
Property Condition Codes

• IN-Insured All properties listed as insured
  are eligible for FHA financing. The originating
  lender is responsible for making the final
  determination whether the property meets Minimum
  Property Standards
• IE-Insured with Escrow Repairs Purchasers may
  qualify for FHA with a repair escrow not to
  exceed 5,000. The originating lender is
  responsible for final determination if the
  property meets Minimum Property Standards and is
  eligible for FHA insurance
• UI-Uninsured Properties listed as uninsured
  means that repairs or improvements exceeding
  5,000 are required. However, FHA financing is
  before the property is eligible for an FHA 203
  (k) mortgage. Purchasers may also opt to
  purchase with cash or conventional financing.
  See lender for more details

7
Property Condition Codes (contd)

• F Property is located in an area where coverage
  under the National Flood Insurance Program may be
  required in order to obtain a loan
• HOA Property is located within a Homeowners
  Association which will most likely require HOA
  fees and dues
• LBP Property was built before 1978 and may
  contain lead-based paint an LBP Addendum form
  must accompany the sales contract

8
Additional info about IE

• Repair Escrow only applies FHA 203(b) financing
• Not a gift from HUD
• Escrow amount is added to the mortgage, but sales
  price remains the same
• On the listing you will see the itemized list of
  the required repairs and the total cost of the
  repairs. 110 of the estimated repair cost will
  be added to mortgage
• Lender is responsible for repairs and making sure
  contractor is licensed
• No repairs may be done prior to closing

9
Listing Periods

• Property listings are updated daily
• For IE and IN properties, in promotion of
  homeownership
• owner occupants are given priority during the
  first 30 days
• all bids placed during the first 10 days are
  reviewed and on the 11th day and treated as
  simultaneously received
• Additional bids can be received and reviewed up
  to the 30th day. Investor bids accepted on the
  31st day
• For UI properties
• are placed in the lottery period for Non-profits
  and Government Agencies for the first 7 days
• If no bids are accepted properties are placed in
  the exclusive owner occupants period for the
  first 5 days
• Investor bids are accepted on the 6th day

10
Listing PeriodsIN and IE Properties (Insured and
Insured Escrow)
11
Listing PeriodsUI Properties (Uninsured)
12
HUDs Special Programs

• There are several special programs offered by
  HUD
• Good Neighbor Next Door (GNND)
• First Look Program
• Asset Control Area (ACA)
• 1 homes

13
Good Neighbor Next Door

• Properties located within a designated
  revitalization area may be offered to
  Firefighters, EMTs, Teachers, and Police
• Buyer will get 50 off of list-price (the 50 is
  a silent second that will be forgiven after 36
  months of primary occupancy in the property)
• Buyer cannot have owned a property in the last 12
  months
• Buyer cannot have participated in GNND before
• Note If you are the Co-Listing Broker on a
  property sold under the GNND program, you DO NOT
  receive a commission

14
Good Neighbor Next Door

• Can be any type of financing or cash transaction
• If FHA, must qualify for 100 of the price
• HUD will not pay for any closing costs OR real
  estate commissions
• Buyers who wish to participate in the program
  must submit a 100 list price offer
• GNND properties are available for 7 days before
  they are for sale to the public
• Eligible buyers are selected by lottery from
  those who indicate a willingness to buy and meet
  all of the requirements and restrictions
• Note If you are the Co-Listing Broker on a
  property sold under the GNND program, you DO NOT
  receive a commission

15
First Look Sales Method

• First Look will provide Neighborhood
  Stabilization Program grantees a discount of 10
  percent below the appraised value, less the cost
  of any applicable listing and sales commissions
• Properties are available for First Look purchase
  for 14 days prior to listing to the public
• Eligible NSP grantees may acquire these
  properties with the assistance of NSP funds for
  any eligible use under NSP, including rental or
  homeownership
• Available through May 31, 2013
• Note If you are the Co-Listing Broker on a
  property sold under the First Look program, you
  DO NOT receive a commission

16
Asset Control Areas

• Foreclosed properties that are located in a
  designated ACA are first offered for sale to an
  ACA participant
• State, county and local units of government, as
  well as approved nonprofit organizations may
  enter into a two-year contract with HUD requiring
  HUD to first make FHA properties located in an
  ACA exclusively available for sale to the ACA
  participant
• ACA properties with an appraised value of 25,000
  or less may be purchased for 100 all other
  properties sold under the ACA Program are offered
  for sale at a minimum discount of 50 of the
  appraised property value
• Note If you are the Co-Listing Broker on a
  property sold under the ACA program, you DO NOT
  receive a commission

17
1 HUD Homes

• If a property has not sold after 6 months on the
  market, HUD's Dollar Homes initiative gives local
  governments the opportunity to purchase it for 1
• Local governments can partner with local
  nonprofit homeownership organizations or tap into
  existing local programs to resell the homes to
  low- and moderate-income residents of the
  community
• If the property does not sell under the 1 Homes
  program within 10 days, it is relisted at the
  previous listed price. Government agencies may
  still buy the property for 1 plus closing costs
• Note If you are the Co-Listing Broker on a
  property sold under the 1 Homes program, you DO
  NOT receive a commission

18
FHA Loans

• FHA loans are available and may be the best deal
  for your buyers. FHA loans feature
• Low down payment
• Low closing costs
• Easy credit qualifying

19
FHA Loans (contd)

• Who Benefits?
• First time home buyers
• Can buy with as little as 3.5 down payment
• Fixer-uppers
• Remodeling or repair costs can be included in
  your loan
• Energy efficiency improvement can be included in
  your FHA loan
• Seniors may qualify for a reverse mortgage on
  their current home if
• 62 or older
• Living in your home
• Own home outright or have a low loan balance
• Manufactured and Mobile Homes may qualify for FHA
  financing

20
FHA Loans (contd)

• For more information
• http//www.hud.gov/buying/loans.cfm
• For information about local programs in your
  area
• http//www.hud.gov/buying/localbuying.cfm
• To find an FHA lender
• http//www.hud.gov/ll/code/llslcrit.cfm
• To talk to a HUD Housing Counselor
• http//portal.hud.gov/hudportal/HUD?src/i_want_to
  /talk_to_a_housing_counselor

21
Access to Properties

• Lockboxes MAY be on many HUD properties
• Appointments are required in order to track
  showings
• You MUST sign and date the sign-in sheet upon
  entering the property
• Do not leave a business card
• Be sure to secure the property when leaving
• You should accompany every visitor when touring a
  HUD property. This includes buyers, inspectors,
  appraisers, or any other company or individual
  performing services
• Note Failure to abide by these policies can
  result in cancellation of the sale transaction
  and forfeiture of the earnest money deposit. In
  addition, bidding privileges for the selling
  agent and brokerage firm could be suspended

22
Bidding Process

• All HUD homes are sold via an online electronic
  bidding process
• Only brokerages with an active NAID number may
  place bids on buyers behalf
• Bids may be submitted 24/7, but are not reviewed
  over Holidays or weekends
• Daily bid deadline is at 1159pm CST
• On the bid deadline day all offers are reviewed
  and then accepted, rejected, or counter-offered
• Winning bids are usually posted at Noon the day
  after the close of bidding
• Backup offers are noted and carried along with
  the winning bid
• If two acceptable bids are the exact same amount,
  there is a random electronic drawing
• Bid Confirmation number will be provided

23
Bidding Process (contd)

• Complete the sales contract with your buyer PRIOR
  to bidding
• All contracts MUST be completed using blue ink
• Your buyers signature is your permission to
  place a bid on their behalf
• If your offer is accepted, you will be notified
  via email
• You will have only two (2) business days to
  submit the entire contract package to the Asset
  Manager
• The appropriate asset manager can be found on the
  Agent Info found in the information section of
  the property description at www.HUDHomestore.com

24
Bidding Process (contd)

• The information entered on the bid submission
  page will become the first page of the sales
  contract
• Closing costs-Line 5
• HUD will allow up to 3 of the purchase price to
  go towards closing costs. Enter the numeric
  figure, not a percentage
• Commission-Line 6a
• HUD will allow up to 3 of the purchase price to
  go to the selling agent the form will auto
  populate the listing agents commission
• Note Lines 5 and 6a will be deducted from the
  offer price and will affect the net amount paid
  to HUD

25
HUDs as is policy

• HUD makes no representation or warranty to the
  condition of the property
• The purchaser is responsible for taking the
  necessary steps to determine the condition of the
  property
• Initial property inspection reports are conducted
  and may be found at www.HUDHomestore.com. These
  are preliminary and not meant to replace a
  traditional home inspection
• Buyers do not acquire any liens or bills from
  previous owner

26
Bidding over the as is value

• The as-is value is the appraised value
• You can NOT get a 2nd appraisal when using FHA
• Overbidding requires submission of proof of
  funds overage must be cash at closing and cannot
  be financed
• Notice to Purchaser Addendum must be completed
  and submitted with contract package

27
Sales Contract Package

• ALL necessary documents must be delivered to the
  appropriate Asset Manager within 2 BUSINESS DAYS
• YOU MUST ALSO ELECTRONICALLY SUBMIT
• HUD-9548 Sales Contract and Conditions of Sale
• HUD-9548 Contract Addendum
• A populated version of the contract package will
  be available for you to print from the Final
  Offer Submission Page and from you HUD Home Store
  Selling Account

• A complete sales contract package will include
• HUD-9548 Sales Contract and Conditions of Sale
• HUD-9548 Contract Addendum
• Lender Letter/Prequalification
• Original Earnest Money Check and Earnest Money
  Certification Form
• For Your Protection Get a Home Inspection form
• Radon Gas and Mold Notice
• Forfeiture and Extension policy
• Forms that may be required
• Lead Based Paint
• Flood Zone Addendum
• Owner occupant certification
• Notice to Purchaser

28
Sales Contract

• http//www.hud.gov/offices/adm/hudclips/forms/file
  s/9548.pdf

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Avoid common mistakes!

• Include buyers social security numbers
• The buyers name must match exactly on lines 1, 2
  and 13
• All signatures must be in BLUE INK
• All purchasers initials on line 12 acknowledging
  the earnest money policy

30
Contract Corrections

• Must return corrected contract no more than 2
  business days from notification that correction
  is needed
• Contract will be awarded to next highest bidder
  if the contract is returned still containing
  errors
• May require a new contract package
• You cannot use white out or liquid paper on any
  contract documents! This may mean that you must
  write a new contract and obtain your buyers
  signatures again

31
Earnest Money

• Deposit Amounts (certified funds only)
• 500 for sales price less than 50,000
• 1 of sales price for properties 50,001 and up
• Not to exceed 2,000
• EM is payable to HUD at US Department of HUD
• EM is submitted with the contract package to the
  Asset Manager-the AM will submit the EM to the
  closing agent. The contract will not be executed
  without the physical earnest money check
• May be entirely or partially refunded, refer to
  Forfeiture and Extension policy for more
  information

32
Inspections

• Buyers are strongly encouraged to do their own
  inspection
• Property will be winterized unless located within
  a multi-family community in which the water is
  managed by the HOA
• Read through the Property Conditions Report if
  it states Water Conditions Unsatisfactory then
  the water cannot be turned on and an air pressure
  test must be conducted
• Inspections must happen within 15 day due
  diligence period
• Inspections may be conducted only after you
  receive permission from the Field Service Manager
• Field Service Manager contact information for
  properties not currently on the market can be
  found at www.HUDHomestore.com by clicking the
  Property Contacts tab on the homepage
• You will be given 48 hours to conduct inspection
  and must turn off utilities after inspection
• It is a good idea to complete a walk through with
  your buyer the day before closing. Report any
  issues to listing broker. If the lockbox is
  removed, coordinate getting a key from the
  listing agent

33
Extensions
Sales Price Fee per day Total

• Extensions are purchased and granted in 15 day
  increments
• Fee must be submitted in certified funds with the
  request form not less than 5 days prior to
  expiration date
• Fees are as shown in the chart

34
Canceling the Contract

• Use the Contract Release and Earnest Money
  Disposition found on www.HUDHomestore.com
• Submit the forms prior to the expiration of sales
  contract

35
Closing Costs

• Buyer must make a specific request to HUD to pay
  a portion of the closing costs
• The following are closing costs automatically
  paid by HUD
• Condo or HOA transfer fees
• Costs to provide condo docs to purchaser
• Recording fees
• Settlement or Closing agent fees for HUDs
  designated closing agent. If purchaser chooses
  an alternative closing agent, then it is at the
  purchasers cost

36
Closing Costs (contd)

• The following closing costs MAY be paid by HUD
  (Max 3)
• Appraisal fees
• Credit Report
• Flood certification
• Loan discount points (up to 3)
• Loan origination fees (up to 1)
• Recording fees, transfer taxes, or fees
• Survey (if required by lender)
• Title insurance coverage for Lender and Owner
• Home Inspection (including mold, radon, and LBP)
• Closing costs NOT paid by HUD
• Prepaid escrows/reserves for association dues
• Prepaid Homeowners insurance or property taxes
• Prepaid flood insurance

37
After Closing

• Buyer may now de-winterize and occupy the
  property
• Buyer should, at their own expense, have the
  property re-keyed
• Buyer will not receive garage door openers,
  mailbox keys, etc.

38
Additional Questions

• Please visit www.HUDHomestore.com
• or the HUD buyers site at
• http//www.hud.gov/offices/hsg/sfh/reo/reobuyfaq.
  cfm