The United States Department of Housing and Urban Developmenti (HUDi) oversees the Federal Housing Administrationi (FHAi), which provides federal insurancei on home mortgages. If a homeowner fails to make payments on an FHA loan, the mortgageei forecloses and files an insurance claim with HUD. In exchange for paying off the unpaid loan balance to the mortgagee, HUD receives titlei to the property. At this pointi, the house becomes a HUD owned home.
After the mortgagee conveys the property to HUD, the Management and Marketing Contractor (M&M Contractor) begins the process of managing and marketing the homes according to HUD guidelines . The M&M Contractor is First Preston Foreclosurei Specialists or Southeast Alliance of Foreclosure Specialists, depending upon the state or territory where the property is located.
Who Can By HUD Homes?
Any qualified purchaser can offeri to buy HUD homes, regardless of race, color, religion, sex, national origin, handicap, or familial status. We abide by all U.S. Fair Housing standards and guidelines. Buyers must work through a registered HUD real estatei brokeri to bid, and they must have pre-qualified for the loan amounti they anticipate will be needed.
Who Can Sell HUD Homes?
Any State licensed real estate broker who completes the participation and information form (SAMS 1111 and 1111A) can show, advertise, and submit offers on HUD owned properties. Choose your broker carefully! Your broker must get this paperwork done well in advance before showing you homes to save the risk of any obstacle preventing successful bidding. Although we require the signature of the broker of record on most HUD forms, any sales agent in that broker's office can show and sell HUD homes. When completed, with all attachments, the documents go to the Regional Office for processing and forwarding to HUD. When we have received the documents, your broker may bid using their SSN or EIN within ten days. The actual NAID (Name Address Identifier) number will come from HUD when it is processed.
THREE TYPES OF HUD LISTINGS
A Disposition Plan is determined at the Regional Office for each HUD home. The homes are then listed according to the FHA financing code. This code is important to understand regarding the property you are selling. The three types are as follows:
1. Insurable (IN)
Properties listed in this category meet FHA203(b) insurance requirements. No repairs are necessary for HUD to insure an FHA loan to the buyer.
Financing not involving FHA may be used on properties in this category as well.
2. Insurable with Repair Escrowi (IE)
Properties listed in this category are eligible for a 203(b) loan with repair escrow. If you are using a 203(b) loan, you must accept the repair escrow. Add the amount to the bid price.
An escrow accounti is established with the lender making the new FHA 203(b) loan to the buyer for the amount of the repairs. Upon close of escrow, the lender will inspect and distribute the repair monies as appropriate within (30) days. The costs of repairs are included in the loan amount and repaid by the borroweri as part of the house payment.
Financing not involving FHA may be used to purchase properties in this category as well.
3. Uninsurable(UI)
Properties listed as uninsurable are likely to need more extensive repairs after close of escrow and are deemed not eligible for FHA insurance in
their as-is condition. These houses are offered to approved non-profit organizations, government housing agencies, and other Community Advancement
Programs (CAPi) participants in an effort to assist with the affordable housing needs of the persons CAP organizations are pledged to help.
Cash purchases or financing not involving FHA insurance is generally utilized on properties in this category.
However, these properties are eligible for the FHA 203(k) loan program, unless specifically noted otherwise. Though this program, a lender can provide funds for rehabilitation along with the mortgagei. A minimum of $5,000 in FHA required repairs or improvementsi qualifies the home for 203(k) financing.
LISTING TIMELINE
DAYS 1 - 5 ( OWNER-OCCUPANTS ONLY, FIRST BID OPENING)
Priority will be given to owner-occupant purchasers for the first ten (10) calendar days.
*All owner-occupant offers received during the first five (5) day of this ten (10) day period are considered to have received simultaneously.
During the next business day following the expiration of the first five (5) day period, the M&M Contractor will review the owner-occupant bids received electronically. We will accept the owner-occupant bid offering the highest acceptable net amount.
DAYS 6-10 (OWNER-OCCUPANTS ONLY, DAILY BID OPENINGS)
If there are no acceptable owner-occupant bids in 1-5 days, the M&M Contractor will open bids on a daily basis for an additional
five (5) days. At each daily review, we will select the highest acceptable net owner-occupant bid. Bids are not opened on weekends or federal holidays.If, at the conclusion of the 10-day owner-occupant period, the property remains unsold to an owner-occupant, the M&M Contractor will review all bids received during the previous ten (10) days. Usually, this includes some bids from investors. If any acceptable investor bids have been received, the highest acceptable net amount is selected.
DAYS 11-45 (ALL BIDDERS, DAILY BID OPENINGS)
In the event a property remains unsold after these bid openings, the M&M Contractor reviews electronic bids on a daily basis. Bids received on the same day are considered to have been received simultaneously. Weekend bids are opened on the following business day. The highest acceptable net bid is accepted on the date opened. Occupancy is not considered in awarding the bid- only the net figure.
DAYS 46 AND BEYOND ( ALL BIDERS, DAILY BID OPENINGS)
In the event a property remains unsold after these bid openings, the M&M Contractor will re-analyze the property. A lower minimum
acceptable bid amount may be established and lower bids accepted, and the listing price may be reduced. Bids are reviewed daily, and those received on the same day are considered to be simultaneous. The highest acceptable net bid is accepted on the day opened. Occupancy is not considered in awarding the bid-only the net figure.
MULTIPLE OFFERS BY ONE OWNER-OCCUPANT
If multiple offers are submitted by one owner-occupant on several properties, the offers will be considered in the following manner:
1st) If the owner-occupant is the sole acceptable offeror on a single property, that bid will be awarded without considerationi to other offers.
2nd) Otherwise, the offer that provides the greatest net return to HUD (item #7) will be awarded to the purchaser.
MULTIPLE OFFERS BY ONE PURCHASER ON THE SAME PROPERTY
Unless a bid is cancelled using the Bid Cancellation Form prior to the bid deadline, the offer that represents the greatest net to HUD will be accepted. All forms and contact information, including the fax number for each Regional Office, are located at www.firstpreston.com.
BID RESULTS
Bid results are posted to the Internet at www.firtpreston.com on or about Noon on the next business day after the bid deadline. Select the link for that days "Bid Results."
This is especially IMPORTANT because the posting of an accepted offer on the Internet constitutes our notice to the winning bidder's broker. This also starts the clock on the 48 hours allowed to submit the contracti package to the appropriate First Preston Foreclosure Specialist or Southeast Alliance of Foreclosure Specialist Regional Office.
ONCE YOU ARE AWARDED A BID...
If you are the successful bidder on a HUD home, the broker has a maximum of 48 hours (weekends and holidays excluded) to deliver the complete and accurate sales contract package to the Regional Office. There are NO Exceptions to this deadline. Any overnight delivery service that offers a receipt and tracking number is good to get this done. Use regular U.S. mail only if you get a "Delivery Confirmation Receipt." Postmarking within 48 hours is not acceptable. Your broker will deliver your contract with addenda, pre-qualificationi letter, and a copy of the certified check or money order for the earnest moneyi to the Regional Office. The package must include a self-addressed envelope for the return of the signed contract to the broker We will provide first class U. S. postage. For expedited service, include a self-addressed overnight envelope with the charges pre-paid by the receiver.
HUD Homes Sales Procedures and Requirements
ERRORS ON THE SALES CONTRACT OF ADDENDA
For a limited time only, if a broker submits an otherwise acceptable contract that contains errors or omissions, they will be notified and given 48-hour
time period to make corrections and return them. Usually this will require writing a completely new sales contract and having the buyers sign again.
Faxed copies will not be considered under any circumstances.
Corrected sales offers that still contain errors or omissions are subject to rejection of the preliminary acceptancei. After acceptance, significant changes to the contract are not allowed. Please make every effort to complete the sales offer correctly the first time!
"AS-IS" POLICY
All HUD Homes are sold on an "as-is" basis. HUD does not make any repairs or warranties, expressed or implied, on the homes. HUD does not guarantee the condition of any house, FHA-insured or not, or whether it meets local codes or zoningi requirements. Buyers must make sure the home is in the condition they are willing to accept. Inspect the home thoroughly. The inspection prior to bid is made without utilities. Winning bidders may make an inspection with utilities on at their own expense. The broker arranges for this. NOTEi: Please carefully read, and make certain you understand, Paragraph B of "Conditions of Sale," which is highlighted on the back of the HUD-9548 contract form.
EARNEST MONEY DEPOSITii FORFEITURE POLICY
A. Investor Purchasers
- Uninsured Sales- The purchaser forfeits 100% of the deposit for failure to close, regardless of reason.
- 2) Insured Sales- The purchaser forfeits 50% of the deposit for failure to close if the purchaser is determined by HUD to
be an unacceptable buyer. The purchaser forfeits 100% if sale fails to close for any other reason .
B. Owner-Occupant Purchasers
1) The entire deposit will be returned, if requested in writing within 15 days, with adequate documentation included when:
- There has been a death in the immediate family;
- There has been a recent serious illness in the immediate family that has resulted in significant medical expenses or substantial income loss, adversely affecting the purchaser's financial ability to close the sale;
- There has been a loss of job by one of the primary breadwinners, or substantial loss of income through no fault of the purchaser;
- On an insured sale, HUD (or Direct Endorsement underwriter) determines that the purchaser is not an acceptable borrower;
- On an uninsured sale, the purchaser was pre-qualified* for mortgage financing in an appropriate amount for a 203(k) loan by a recognized mortgage lender and, despite good faith efforts, is unable to obtain mortgage financing; or.
- There is other equally good cause, as determined by the M&M Contractor, in keeping with the spirit and intent of the above policy.
- * "Pre-qualification" means a loan applicationii has been made, and a preliminary loan commitmenti has been obtained from a recognized mortgage lender for mortgage financing in a specified dollar amount sufficient to purchase the property.
2) On an uninsured sale, the purchaser forfeits 50% of the deposit in those instances where, despite good faith efforts by the purchaser, there is an inability to obtain a mortgage loan from a recognized conventional lender.
3) On either an insured or uninsured sale, the purchaser forfeits 100% of the deposit in those instances where no documentation is submitted, where the documentation fails to provide an acceptable cause for the buyer's failure to close, or where documentation is not provided within a reasonable time following contract cancellation.
C. Vacant Lot Sales
The purchaser is considered to be an investor, and the instructions pertaining to forfeiture by investors apply.
Canceling an Escrow:
Please have your broker contact the First Preston or Southeast Alliance Regional Office as soon as you know you are not going to close so that the property can be returned to the market quickly. Requests for return of the earnest money deposit must be in writing, accompanied by supporting documentation to justify a refund. Your broker should use the Earnest Money Disposition Request Form. Requests must be sent to the Regional Office within fifteen (15) days of the cancellation. Failure to do so will result in forfeiture of the entire earnest money deposit.
