selling hud reo's

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Company

LOGO

U.S. Department of Housing And

Urban Development

October 2010

A Guide To Selling HUD Homes

Today’s Agenda

What are HUD Homes?

Compliance, Field, and Asset Managers roles

Who can purchase and sell HUD Homes

Special HUD Home “incentive” programs

Types of HUD Homes listings

Electronic bidding and the contract

FHA Resources

What Are HUD Homes? A HUD Home is a home where the Federal

Housing Administration (FHA) Insured a mortgage

The lender foreclosed

Lender submitted claim for payment to the

Department

HUD paid a claim to lender on the property

Lender deeds property to HUD

The property owner becomes HUD

MORTGAGEE COMPLIANCE MANAGER

(MCM)

Responsible for reconveyances, time

extension requests, over-allowable

requests, title review, request for

occupied conveyance

Michaelson, Connor, and Boul

To date, MCM has processed over

200,000 requests

FIELD SERVICE MANAGER (FSM)

Field Service Managers (FSMs) provide

Property maintenance

Preservation services, including:

Inspecting the property

Securing the property

Performing cosmetic

enhancements/repairs

Providing on-going maintenance

ASSET MANAGER (AM)

The Asset Managers (AMs) are

responsible for the marketing and

sale of HUD REO property

Multiple Asset Managers in each

market

Santa Ana Homeownership Center

Asset and Field Service Managers

Asset Managers Field Service Managers

Area: AZ, ID, NV Area: AZ, ID, NV

BLB FIRST PRESTON

SIGMA

Area: AK, CA, HI,

OR, WA

Area: AK, CA, HI,

OR, WA

AMS

CITYSIDEBLB

PEMCO

Commission split between listing and selling brokers One national web-site for all HUD listings and

property information www.HUDHomestore.com

IMPACT ON REALTORS

http://www.hudhomestore.com/

Improved Customer Service

•More engagement of Local Listing Brokers

Longer “EXCLUSIVE” period for owner

occupants on Insured Listings

• Increased to 30 Days from 10 Days

•Includes HUD-approved Nonprofits

• Investor bids considered after Day 31

Greater Opportunity for Homeownership

IMPACT ON HOMEBUYERS

HUD’s First Step – Prior To Listing

Property inspected and secured by

HUD’s Field Service Manager

Property appraised by HUD’s

Asset Manager

Sales price determined

Second Step – HUD Lists Property

Property listed on MLS & internet

Real estate agent may show

Prospective purchasers

Real estate agent completes sales package

With purchasers

Second Step – Continued

Real estate agent submits bid electronically

Bids reviewed to determine best “net” offer

Bid acceptance posted on internet

Third Step – HUD Accepts Offer

Earnest money held by Real Estate Broker

until offer accepted

Sales Package sent via overnight mail

If submitted sales package complete and

correct

Sales contract signed by HUD

Ratified

Forwarded to HUD’s designated closing

agent

Copy to real estate agent

Final Step – Closing The Sale

Earnest money delivered to HUD’s Asset

Manger (possible exceptions for Oregon)

Escrow opens with HUD’s closing agent

Buyer secures financing

Purchaser(s) perform home inspection

Optional but highly recommended

Sale closes with HUD’s closing agent

Purchaser(s) re-key locks after close

At purchaser(s) expense

Who Can Purchase A HUD Home?

Any buyer that can secure a loan or can

pay cash

Purchaser(s) must use HUD registered

REO broker/agent

Purchaser(s) must have pre-qualification

letter from a lender or proof of cash

funds in the amount of or greater than

the property they are purchasing

Who Can Sell A HUD Home?

Any licensed real estate broker

Registered with HUD

www.HUDHomestore.com

Broker must be registered PRIOR to

Broker or agent working with any

purchaser(s)

A real estate agent

Employed by a HUD registered broker

All offers must be submitted through

approved broker number only

HUD Home

$100 Down Incentive Program May or may not be available for the area

Check at: www.HUDHomestore.com

Available only to owner-occupant buyers

using FHA mortgage insurance financing

Owner-occupant buyer responsible for full

earnest money deposit

FHA insured loan must be manually

underwritten

Verify lender participates

Good Neighbor Next Door Program

Also Known As – GNND for HUD REO’s

Designed to make American communities stronger

To help build a safer nation

To encourage employees of eligible groups to become homeowners

GNND Purchaser Benefits

50% off HUD’s list price

Silent second for difference

No interest

Forgiven after three years

$100 down payment

GNND Requirements

Property must be located in a designated

“Revitalization Area”

Buyer must live in property purchasing

36 months

Buyer nor spouse may have owned any

property

Previous 12 months

Buyer nor spouse may have previously

purchased under the GNND program

GNND Requirements -

Continued Must bid 100% of listing price

Listed on Fridays

Can utilize any type of financing or pay

cash

For FHA Financing

Must qualify for entire contract amount prior to

discount

HUD will not pay any closing costs or real

estate commissions

GNND Eligible Groups

Law enforcement officers

Federal government

State

Unit of local government

Indian tribal government

Full-time employment sworn to uphold and make arrests for violations

Federal, state, tribal, county, township, and municipal laws

GNND Eligible Groups – Cont.

Teachers

Employed as full-time teacher

Pre-K through 12th grade

State-accredited public or private

school providing direct services to

students

Must serve students from area where

purchasing home is located in normal

course of business

GNND Eligible Groups – Cont.

Firefighters/Emergency Medical Technician

Employed full-time as firefighter or EMT

Federal government

State

Unit of local government

Indian tribal government

Serving in area where the home is

located

Types Of HUD Home Listings

HUD Homes are sold “as is”

No guarantee or warranty property free of:

Visible or hidden defects

Termite damage

Lead based paint

Any other condition that renders

property uninhabitable or un-usable


Three basic listing types

IN – Insurable

IE – Insurable with Escrow

UI – Uninsurable

Conventional, Cash, or FHA

Rehabilitation Loan (203k)

First Type of HUD Home Listing

IN – Insurable

Eligible for FHA home loan insurance

203(b) financing

No needed repairs determined


IE – Insurable with Escrow

Eligible for FHA financing

“Minimum Property Repair” (MPR) repairs

Roof, structural, mechanical systems

Less than $5,000

Repairs completed by purchaser after close

Cost of repairs not paid by HUD

May finance repair escrow amount in mortgage

Purchase contract repair escrow amount not

deducted from “Net” to HUD


UI – Uninsurable

Generally in need of extensive repairs

Usually purchased with cash or conventional

financing

Only type of FHA financing may be with

Rehabilitation Loan (203k)

Owner occupancy required for FHA

Minimum $5,000 MPR (Minimum Property

Repairs)

Not all properties will qualify

How The Bidding Works

All listings posted on-line at contractor’s site

Priority given to owner-occupant buyers

First 30 days of listing

Once a bid is accepted cannot change

Purchase price

Closing cost

Commission

Overbidding on HUD REO’s

Buyer must

Purchaser must pay difference in cash between bid

amount and “List Price” (“As-Is” appraisal)

Increased cash investment from own funds

Cancel contract

Possible loss of deposit

Second appraisals may not be ordered simply

to support a purchase price higher than value

on current appraisal

Electronic Bidding Process

All HUD REO bidding is

done electronically

Before submitting bid

Have sales contract complete

and ready

Have all necessary addenda

filled out completely

How The Bidding Works

“Daily” deadline listings posted

Must submit bid by 11:50 pm

Bids submitted on Friday, Saturday, or Sunday

Reviewed following Monday (or business day)

Bid results posted daily by 4 pm (EST)

More than one acceptable bid goes to highest

net to HUD bidder

Back-up offers held

Bids not acceptable but within a range

Contractor announces resubmission/counter offers

Bid Submission

Go to www.HUDHomestore.com

Click a home's case number to display the Property

Details screen

On that screen is the Submit an Offer button

Enter Broker’s Federal Tax ID or SSN

Fill out form

Follow line-by-line contract instructions

All purchaser/company information must be accurate

and match the Sales Contract

Bid may be cancelled

http://www.hudhomestore.com/

Accepted Bids

Bid acceptance posted on internet

Completed hard copy of sales package

must be sent to HUD REO contractor

for ratification

Not valid sale until ratified/signed

Overnight mail

Accepted Bids – Cont.

Contractor ratifies contract

Ratified contract forwarded to closing

agent

Copy to real estate agent

Earnest money deposit delivered to HUD’s Asset Manger (except Oregon)

Escrow opened

Buyer secures financing

Sale closes

Closing Timeline

Buyers utilizing FHA insured financing,

conventional, other types of financing, or

paying cash

Escrow closing date is 45 days from contract

acceptance

Buyers utilizing one of FHA’s Rehabilitation

Loan programs

Escrow closing date is 60 days from contract

acceptance

Time starts from when contract ratified

Other Bidding Process Notes

Information entered on bid cannot be changed

After offer provisionally accepted

Owner-occupant purchasers may only have

one accepted offer at a time

Cancellation request would have to be

processed prior to submission of a new bid

Upon completion of cancellation process

Faxed letter confirming and

Notification of disposition of earnest money

deposit for cancelled offer

HUD’s Sales Contract

HUD Form 9548

Only acceptable contract used

Examples of line items in contract

Purchaser or purchasers names

Offer price

Type of financing

Closing cost

Agent commission

Net to HUD

Etc.

Completing the HUD Sales

Contract

Buyers name must match exactly

Lines 1, 2, and 13

Bid may be cancelled if names change/different

Purchaser(s) must have:

Pre-qualification letter from a lender or

Proof of cash funds in the amount of or

greater than the property they are purchasing

Common Problems Causing

Closing Delays

Type of financing changed during escrow

Buyer not fully pre – qualified before offer

Lender is not FHA approved

If buyer is utilizing FHA insured financing

Agent and loan officer not communicating

with lender

HUD sales process

Contract Revisions

Changes to financing

Addendum to Change Financing must be

completed and submitted for approval

To contractor

Must be revised and approved prior to close

Contract Revisions – Changes to

Financing Continued

Changing from FHA Home Loan Insurance Program (203b) to FHA Rehabilitation Mortgage (203k)

NOTE: CANNOT change to FHA Home Loan Insurance Program (203b) on property that was listed as “Uninsurable” (UI)

Contract Revisions – Continued

Removal or addition of Purchaser(s)

Must submit applicable addendum

To contractor

Must be revised and approved prior to close

Minimum of one original buyer must remain if

opened file with closing agent

Sale may be cancelled

Deposit may be forfeited

CANNOT change buyer “type” under any

circumstance

Contract Revisions - Continued

Buyer utilizing FHA insured financing who

obtained a Home Inspection and that

inspection reveals additional repairs

Items can be added to an Escrow Repair

Up to $5,000 in repairs

Repairs greater than $5,000

Financing may be changed to a Rehabilitation

Loan (203k)

Contract Revisions

Additional Repairs Needed

Lender’s Direct Endorsement Underwriter

must submit a signed request on company

letterhead

To contractor

Identifies revised/new dollar amount

Purchase Contract (9548) completed to

reflect revision

By real estate agent representing buyer

Original to contractor

HUD Sales Contract Addendums

10 total Addendums

Six – required required

Four – “As applicable“

All addendums required or needed

Must be signed

By appropriate party/parties


Addendum to electronic filing of Purchase Contract (9548)

Owner-occupancy certification (as applicable – Required for FHA insured financing)

“For Your Protection – Get A Home Inspection”


Radon Gas and Mold Notice

Lender’s “Letter of Commitment/Pre-

Qualification Letter (as applicable)

On lender’s letterhead

Signed by lender

Lead – Based Paint Addendum (as applicable)

Flood Zone Addendum (as applicable)


Continued

Forfeiture & Extension Policy

Addendum A; Revised July 13, 2009

Addendum to Sales Contract for the HUD Sales Incentive (if applicable)

Copy of Earnest Money Check with the Earnest Money Certification Form ORevidence borrower has funds when paying cash/cash deal

FHA Amendatory Clause

HUD Homes are exempt from the

FHA Amendatory Clause

Addendum not required

Will not be executed by HUD on a

HUD Home sale

Extension Requests

Any extension requests

Sent to closing agent

Not to contractor

With applicable fees

Must be “Certified Funds”

Fees may be waived on first request for

buyers using FHA insured financing

All requests must be accompanied by

sufficient documentation and evidence of

ability to close

Entering HUD Owned Homes

Access to HUD owned properties is restricted

to:

Purchaser(s) viewing when listed for sale

Individuals performing services such as

home inspection, appraisals, or certifications

No work allowed

Entry must be accompanied by HUD registered

REO broker/agent at all times

Final Notes On Entering

Prior to close of sale transaction on HUD Home

No work can be done on the property

By anyone for any reason

Purchasers may not use home for storage

Any personal items for any reason

Purchaser(s) may not occupy home

Under any circumstance

Will be treated as trespassing

Where to Get More Information

1 – 800 – CALL – FHA (1 – 800 – 225 – 5342) A source for all FHA questions

Industry partners and Consumers

www.hud.gov On-line resource for info about FHA and FHA

programs

On-line source for all other HUD programs, grants,

forms, press releases, etc.

User friendly


www.fhaoutreach.gov/FHAFAQ On-line resource to frequently asked questions

www.hud.gov

www.fhaoutreach.gov/FHAFAQ

The U.S. Department of Housing and Urban

Development

would like to thank the California Association of

Mortgage Professionals

and

Oregon Association of Mortgage Professionals

and it’s members for your interest in

FHA and FHA programs

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