Selling hud reo's


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Selling hud reo's

  1. 1. Selling HUD REO Properties Thank you for joining the Webinar! • We will begin at 1:00 p.m. • Your phone will be muted, as there are hundreds of Members on the call. Don’t forget to turn on your computer speakers or call in to hear the audio. • You can shrink the control window by clicking on the right hand arrow. • You can type your questions in the chat window and we will do our best to answer in the course of the session.
  2. 2. A Guide To Selling HUD Homes U.S. Department of Housing And Urban Development October 2010 Company LOGO
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. ASSET MANAGER (AM) The Asset Managers (AMs) are responsible for the marketing and sale of HUD REO property Multiple Asset Managers in each market
  8. 8. 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, Area: AK, CA, HI, OR, WA OR, WA BLB AMS PEMCO CITYSIDE
  9. 9. IMPACT ON REALTORS  Commission split between listing and selling brokers  One national web-site for all HUD listings and property information 
  10. 10. IMPACT ON HOMEBUYERS  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
  11. 11. 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
  12. 12. 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
  13. 13. Second Step – Continued  Real estate agent submits bid electronically  Bids reviewed to determine best “net” offer  Bid acceptance posted on internet
  14. 14. 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
  15. 15. 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
  16. 16. 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
  17. 17. Who Can Sell A HUD Home?  Any licensed real estate broker  Registered with HUD   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
  18. 18. HUD Home $100 Down Incentive Program  May or may not be available for the area  Check at:  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
  19. 19. 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
  20. 20. GNND Purchaser Benefits  50% off HUD’s list price  Silent second for difference No interest Forgiven after three years  $100 down payment
  21. 21. 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
  22. 22. 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
  23. 23. 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
  24. 24. 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
  25. 25. 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
  26. 26. 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
  27. 27. Types Of HUD Home Listings  Three basic listing types  IN – Insurable  IE – Insurable with Escrow  UI – Uninsurable  Conventional, Cash, or FHA Rehabilitation Loan (203k)
  28. 28. First Type of HUD Home Listing  IN – Insurable  Eligible for FHA home loan insurance  203(b) financing  No needed repairs determined
  29. 29. Types Of HUD Home Listings  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
  30. 30. Types Of HUD Home Listings  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
  31. 31. 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
  32. 32. 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
  33. 33. 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
  34. 34. 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
  35. 35. Bid Submission  Go to  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
  36. 36. 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
  37. 37. 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
  38. 38. 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
  39. 39. 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
  40. 40. 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.
  41. 41. 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
  42. 42. 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
  43. 43. 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
  44. 44. 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)
  45. 45. 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
  46. 46. 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)
  47. 47. 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
  48. 48. 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
  49. 49. HUD Sales Contract Addendums  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”
  50. 50. HUD Sales Contract Addendums  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)
  51. 51. HUD Sales Contract Addendums 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 OR evidence borrower has funds when paying cash/cash deal
  52. 52. 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
  53. 53. 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
  54. 54. 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
  55. 55. 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
  56. 56. Where to Get More Information  1 – 800 – CALL – FHA (1 – 800 – 225 – 5342)  A source for all FHA questions  Industry partners and Consumers   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    On-line resource to frequently asked questions
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  60. 60. 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