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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.
Where 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 (see
Good Neighbor Initiatives).
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. Contact the REO Division of
HUD's
Homeownership Center for details. |
