What
Is a HUD Home?
The
Federal Housing Administration (FHA), which is a part of the Department
of Housing and Urban Development (HUD), provides federal mortgage
insurance which ensures that mortgage lenders will be reimbursed in
the event homebuyers default on the mortgage. When a lender is forced
to foreclose on an FHA-insured single family home, townhome, or condominium
because the owner can no longer make payments, it can file a claim
with FHA for the balance due on the mortgage and convey title of the
property to HUD. A HUD Home, therefore, is a one-to-four unit residence
acquired as a result of a foreclosure on an FHA-insured mortgage.
How
Are HUD Homes Sold?
When a HUD Home becomes available for sale, usually it is listed
on the Multiple Listing Service and on HUD's home page on the Internet.
Any real estate broker who is properly registered with HUD may submit
contracts for purchase. Brokers are used because of their expertise
in the local residential real estate market and because HUD does
not have sufficient staff either to show properties to prospective
buyers or to assist in those other aspects of homebuying normally
handled by brokers.
Most HUD Homes are initially offered on a priority basis to owner
occupant purchasers (people who are buying the home as their primary
residence).
Following the priority period, unsold properties are then available
to all buyers, including investors.
HUD Homes are offered for sale at fair market value, based on a
recent appraisal. Generally, HUD Homes are sold in what is known
as an "Offer Period," during which a potential buyer's offer must
be made. At the end of the Offer Period, all offers are opened and
the bid providing the highest acceptable net return to HUD may then
be accepted. Following the initial "Offer Period" homes remaining
unsold are offered on an "extended" basis which means offers may
be submitted any business day. If a bid on one of these homes is
acceptable, the broker will usually be notified within 48 hours
of HUD's acceptance of the offer.
HUD does not provide direct financing to buyers of HUD Homes. Buyers
must obtain financing through either their own cash reserves or
a mortgage lender.
How
Do I Begin?
It's easy to qualify to sell HUD Homes. First, you have to sign
HUD's Selling Broker Certification forms. You can do this by following
the Broker Registration link on the Management
and Marketing Contractors page for your state. You will need
to submit the following forms: SAMS
1111 Broker application and the SAMS
1111A Selling Broker Certification. Once this is completed,
you can show, advertise, and submit offers on HUD Homes. Upon closing
of a sale, HUD pays the broker a commission of up to five (5) percent
of the selling price if this was a condition of the offer.
How
Do I Learn of Available Properties?
Properties acquired by HUD will display a sign identifying who is
managing the property for a while before they are listed for sale.
What is happening during this time is the property is appraised,
title issues may need to be resolved, and a determination is made
about the property's eligibility for HUD's discount
sales programs. Listings are posted on
the Internet and the Multiple Listing Service. For more information,
contact the Management and Marketing Contractor serving your area.
What
Are Some of the General Sales Conditions?
HUD Homes are sold in their as-is condition without warranty. Because
of HUD's as-is policy, HUD Homes can often be a great opportunity
for the fixer-upper. Not every HUD Home needs fixing up, but when
one does, it can be a real bargain. For example, HUD's asking price
on the home will reflect the fact that the buyer will have to invest
money to make improvements. Also, keep in mind that on most sales
the buyer can request HUD to pay all or a portion of certain financing
and closing costs.
HUD does not warrant the condition of its properties and will not
pay for the correction of defects or repairs. Since the new owner
will be responsible for making needed repairs, HUD strongly urges
every potential homebuyer to get a professional inspection prior
to submitting an offer to purchase.
How
Can I Get Further Information?
If you have more questions, contact the Management
and Marketing Contractor serving your area.
Attention:
Nonprofits and Government Agencies!
HUD has a special sales program under which approved nonprofit organizations
and government agencies may purchase properties at discounted
prices for use in local housing or homeless programs.
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