Purchasing a HUD Home
Who is HUD? HUD stands for the United States Department of
Housing and Urban Development. HUD oversees the
Federal Housing Administration (FHA). They provide federal
insurance against default to home mortgages. If a mortgage is an FHA
loan and it goes into foreclosure, the lender will file an FHA
insurance claim for the unpaid balance of the loan. They then give
the title or convey the title to the property over to HUD.
To purchase a HUD home you will need to find a
HUD approved Real Estate Broker for your state. Only Brokers
registered with HUD and have an active NAID number can bid on HUD
Homes. Check with your agent to see if their brokerage is a
participating member.
All HUD homes are sold by electronic bid.
There are two types of bidders for HUD Homes. There are Daily
All Bidders which opens up the bidding to anyone and then there is
Owner-Occupants. Most bidding starts out as owner-occupants first
and then if no bid is accepted within a specific time frame they
open the bidding to Daily All Bidders. Do not
bid as an owner-occupant if you do not plan on living in the home.
HUD will verify after closing that you live in the home. There are
hefty fines for lying on the HUD contract. Fines can go up to
$250,000.00. Be Honest…it’s the best policy for you and your wallet.
Bids are opened daily until 11:59
p.m.(central time) If there is an acceptable bid Hud will close the
bidding after that day and post the winning bid onto their site.
When bids are posted, the 48-hr clock will
start. The selling agent must deliver the contract package
(with originals) by an overnight carrier. The package has to arrive
within 48hrs. There are no exceptions to this rule. Make sure that
the carrier you choose offers a receipt and a tracking number for
you. You can find the regional office for your area in the “About
Us” section under “Locations” on HUD’s web site. Late or incomplete
packages will be rejected. The site will list
the name of the winning brokerage and the amount of the winning bid.
HUD will reject all offers that do not meet their guidelines
and is considered too low. Make sure that the contract is filled out
completely.
Deposits on HUD homes.
All deposits must be given to the selling agent prior to bidding.
Deposits depend on the sale price of the property. If the sales
price is less than $50,000.00 the deposit is $500.00. For a sales
price of $50,001.00 or more than the deposit is $1000.00. If the
deposit if for vacant land, the deposit is equal to one half of the
price of the lot.
All purchasers must sign a required addendum and include it with the contract package. The addendum states the policy which determines if the purchasers deposit will be refunded or get forfeited to HUD.
On Investor Purchases:
1) If the sale is uninsurable (UI): the purchaser will forfeit 100%
of the deposit.
2) Insurable Sales (IN): the purchaser forfeits 50% of the deposit
for failure to close if it is determined by HUD to be an
unacceptable buyer.
3) Vacant Lots: 100% of the deposit is forfeited.
Owner-Occupant Purchases:
The entire deposit will be returned to the buyer, if requested in
writing within 15 days and adequate documentation is included, when:
• There has been a job loss by one of the primary bread winners or a
substantial loss of income through no fault of the purchaser.
• There was a death in the immediate family )purchaser, spouse or a
child that resided in the same household)
• Recent serious illness in the immediate family. Illness has
resulted in significant medical expenses or income loss. This loss
has affected the purchaser’s financial ability to close the sale.
• On an IN sale, HUD determines that the purchaser is not an
acceptable borrower.
• On an UI sale, the purchaser was pre-approved for mortgage
financing but despite good faith efforts, is unable to obtain
mortgage financing. On a UI sale, the purchaser forfeits 50 percent
of the deposit in those instances where despite good faint efforts
by the purchaser, there is an inability to obtain a mortgage from a
recognized lender.
• On an IN or UI sale, the purchaser will forfeit 100% of the
deposit where no documentation is submitted or when the
documentation fails to provide an acceptable cause for the
purchaser’s failure to close.
To search for homes on HUD you can visit their website at:
http://www.hud.gov
