Brokers Guide To Selling Hud Homes

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Great guide for brokers interested in selling HUD homes to their buyers!

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Brokers Guide To Selling Hud Homes

  1. 1. Brokers’ Guide to Selling HUD Homes
  2. 2. What is a HUD Home? <ul><li>If a loan is insured by the Federal Housing Administration and goes into default, the lender may submit a claim against the FHA insurance Fund and transfer ownership to HUD </li></ul>
  3. 3. Asset Management Changes <ul><li>Effective October of 2010, HUD awarded contracts to multiple Asset Management companies who market HUD properties </li></ul><ul><li>A new website, www.HUDHomestore.com will have all properties available for bidding </li></ul><ul><li>The appropriate Asset Manager (AM) for each property can be found under AGENT INFO </li></ul>
  4. 4. How to show and sell HUD Homes <ul><li>Licensed real-estate brokers who are registered with HUD may show and submit offers on behalf of buyers </li></ul><ul><li>BROKER must register with HUD to receive a NAID number. The same NAID number is used by all agents within the brokerage. Process takes 6-8 weeks to complete and must be renewed annually </li></ul><ul><li>For more information and to register, please go to www.HUDHomestore.com </li></ul>
  5. 5. Listings and Selling Agent Account <ul><li>New listings are available daily and can be found at www.HUDHomestore.com </li></ul><ul><li>You will need to create a Selling Agent Account at www.HUDHomestore.com prior to placing a bid for buyers. This requires the brokerage’s NAID number </li></ul><ul><li>Go to the upper right corner and click “bidder” to register as a selling agent </li></ul><ul><li>Brokers can also check the status of their bids at www.HUDHomestore.com </li></ul><ul><li>This site is also available to the public to search for active listings </li></ul>
  6. 6. Property Condition Codes <ul><li>IN-Insured: All properties listed as “insured” are eligible for FHA financing. The originating lender is responsible for making the final determination whether the property meets Minimum Property Standards </li></ul><ul><li>IE-Insured with Escrow Repairs: Purchasers may qualify for FHA with a repair escrow not to exceed $5,000. The originating lender is responsible for final determination if the property meets Minimum Property Standards and is eligible for FHA insurance </li></ul><ul><li>UI-Uninsured: Properties listed as “uninsured” means that repairs or improvements exceeding $5,000 are required. However, FHA financing is before the property is eligible for an FHA 203 (k) mortgage. Purchasers may also opt to purchase with cash or conventional financing. See lender for more details </li></ul>
  7. 7. Property Condition Codes (cont’d) <ul><li>F: Property is located in an area where coverage under the National Flood Insurance Program may be required in order to obtain a loan </li></ul><ul><li>HOA: Property is located within a Homeowner’s Association which will most likely require HOA fees and dues </li></ul><ul><li>LBP: Property was built before 1978 and may contain lead-based paint; an LBP Addendum form must accompany the sales contract </li></ul>
  8. 8. Additional info about IE <ul><li>Repair Escrow only applies FHA 203(b) financing </li></ul><ul><li>Not a gift from HUD </li></ul><ul><li>Escrow amount is added to the mortgage, but sales price remains the same </li></ul><ul><li>On the listing you will see the itemized list of the required repairs and the total cost of the repairs. 110% of the estimated repair cost will be added to mortgage </li></ul><ul><li>Lender is responsible for repairs and making sure contractor is licensed </li></ul><ul><li>No repairs may be done prior to closing </li></ul>
  9. 9. Listing Periods <ul><li>Property listings are updated daily </li></ul><ul><li>For IE and IN properties, in promotion of homeownership </li></ul><ul><ul><li>owner occupants are given priority during the first 30 days </li></ul></ul><ul><ul><li>all bids placed during the first 10 days are reviewed and on the 11 th day and treated as simultaneously received </li></ul></ul><ul><ul><li>Additional bids can be received and reviewed up to the 30 th day. Investor bids accepted on the 31 st day </li></ul></ul><ul><li>For UI properties </li></ul><ul><ul><li>are placed in the lottery period for Non-profits and Government Agencies for the first 7 days </li></ul></ul><ul><ul><li>If no bids are accepted properties are placed in the exclusive owner occupants period for the first 5 days </li></ul></ul><ul><ul><li>Investor bids are accepted on the 6 th day </li></ul></ul>
  10. 10. Listing Periods IN and IE Properties (Insured and Insured Escrow) 14 day pre-list 5 day pre-list First Look Program for non-profits (NPO) GNND Program Days 1-10 Exclusive Listing Period Owner Occupants Only Bids reviewed on 11 th day Days 11-30 Exclusive Listing Period Owner Occupants and NPO bids Bids reviewed daily Days 31-180 Extended Listing Period If no OO or NPO, then investors can bid; Bids reviewed daily Days 181+ $1.00 to local governments
  11. 11. Listing Periods UI Properties (Uninsured) 14 day pre-list 5 day pre-list First Look Program for non-profits (NPO) GNND Program Days 1-5 Exclusive Listing Period Owner Occupants and NPO bids Bids reviewed on 6 th Day Days 6-180 Extended Listing Period If no OO or NPO, then investors can bid; Bids reviewed daily Days 181+ $1.00 to local governments
  12. 12. HUD’s Special Programs <ul><li>There are several special programs offered by HUD: </li></ul><ul><ul><li>Good Neighbor Next Door (GNND) </li></ul></ul><ul><ul><li>First Look Program </li></ul></ul><ul><ul><li>Asset Control Area (ACA) </li></ul></ul><ul><ul><li>$1 homes </li></ul></ul>
  13. 13. Good Neighbor Next Door <ul><li>Properties located within a designated revitalization area may be offered to Firefighters, EMT’s, Teachers, and Police </li></ul><ul><li>Buyer will get 50% off of list-price (the 50% is a silent second that will be forgiven after 36 months of primary occupancy in the property) </li></ul><ul><li>Buyer cannot have owned a property in the last 12 months </li></ul><ul><li>Buyer cannot have participated in GNND before </li></ul><ul><li>Note: If you are the Co-Listing Broker on a property sold under the GNND program, you DO NOT receive a commission </li></ul>
  14. 14. Good Neighbor Next Door <ul><li>Can be any type of financing or cash transaction </li></ul><ul><li>If FHA, must qualify for 100% of the price </li></ul><ul><li>HUD will not pay for any closing costs OR real estate commissions </li></ul><ul><li>Buyers who wish to participate in the program must submit a 100% list price offer </li></ul><ul><li>GNND properties are available for 7 days before they are for sale to the public </li></ul><ul><li>Eligible buyers are selected by lottery from those who indicate a willingness to buy and meet all of the requirements and restrictions </li></ul><ul><li>Note: If you are the Co-Listing Broker on a property sold under the GNND program, you DO NOT receive a commission </li></ul>
  15. 15. First Look Sales Method <ul><li>First Look will provide Neighborhood Stabilization Program grantees a discount of 10 percent below the appraised value, less the cost of any applicable listing and sales commissions </li></ul><ul><li>Properties are available for First Look purchase for 14 days prior to listing to the public </li></ul><ul><li>Eligible NSP grantees may acquire these properties with the assistance of NSP funds for any eligible use under NSP, including rental or homeownership </li></ul><ul><li>Available through May 31, 2013 </li></ul><ul><li>Note: If you are the Co-Listing Broker on a property sold under the First Look program, you DO NOT receive a commission </li></ul>
  16. 16. Asset Control Areas <ul><li>Foreclosed properties that are located in a designated ACA are first offered for sale to an ACA participant </li></ul><ul><ul><li>State, county and local units of government, as well as approved nonprofit organizations may enter into a two-year contract with HUD requiring HUD to first make FHA properties located in an ACA exclusively available for sale to the ACA participant </li></ul></ul><ul><ul><li>ACA properties with an appraised value of $25,000 or less may be purchased for $100; all other properties sold under the ACA Program are offered for sale at a minimum discount of 50% of the appraised property value </li></ul></ul><ul><li>Note: If you are the Co-Listing Broker on a property sold under the ACA program, you DO NOT receive a commission </li></ul>
  17. 17. $1 HUD Homes <ul><li>If a property has not sold after 6 months on the market, HUD's Dollar Homes initiative gives local governments the opportunity to purchase it for $1 </li></ul><ul><li>Local governments can partner with local nonprofit homeownership organizations or tap into existing local programs to resell the homes to low- and moderate-income residents of the community </li></ul><ul><li>If the property does not sell under the $1 Homes program within 10 days, it is relisted at the previous listed price. Government agencies may still buy the property for $1 plus closing costs </li></ul><ul><li>Note: If you are the Co-Listing Broker on a property sold under the $1 Homes program, you DO NOT receive a commission </li></ul>
  18. 18. FHA Loans <ul><li>FHA loans are available and may be the best deal for your buyers. FHA loans feature: </li></ul><ul><ul><li>Low down payment </li></ul></ul><ul><ul><li>Low closing costs </li></ul></ul><ul><ul><li>Easy credit qualifying </li></ul></ul>
  19. 19. FHA Loans (cont’d) <ul><li>Who Benefits? </li></ul><ul><ul><li>First time home buyers </li></ul></ul><ul><ul><ul><li>Can buy with as little as 3.5% down payment </li></ul></ul></ul><ul><ul><li>Fixer-uppers </li></ul></ul><ul><ul><ul><li>Remodeling or repair costs can be included in your loan </li></ul></ul></ul><ul><ul><ul><li>Energy efficiency improvement can be included in your FHA loan </li></ul></ul></ul><ul><ul><li>Seniors may qualify for a reverse mortgage on their current home if: </li></ul></ul><ul><ul><ul><li>62 or older </li></ul></ul></ul><ul><ul><ul><li>Living in your home </li></ul></ul></ul><ul><ul><ul><li>Own home outright or have a low loan balance </li></ul></ul></ul><ul><ul><li>Manufactured and Mobile Homes may qualify for FHA financing </li></ul></ul>
  20. 20. FHA Loans (cont’d) <ul><li>For more information: </li></ul><ul><ul><li>http://www.hud.gov/buying/loans.cfm </li></ul></ul><ul><li>For information about local programs in your area: </li></ul><ul><ul><li>http://www.hud.gov/buying/localbuying.cfm </li></ul></ul><ul><li>To find an FHA lender: </li></ul><ul><ul><li>http://www.hud.gov/ll/code/llslcrit.cfm </li></ul></ul><ul><li>To talk to a HUD Housing Counselor: </li></ul><ul><ul><li>http://portal.hud.gov/hudportal/HUD?src=/i_want_to/talk_to_a_housing_counselor </li></ul></ul>
  21. 21. Access to Properties <ul><li>Lockboxes MAY be on many HUD properties </li></ul><ul><ul><li>Appointments are required in order to track showings </li></ul></ul><ul><ul><li>You MUST sign and date the sign-in sheet upon entering the property </li></ul></ul><ul><ul><li>Do not leave a business card </li></ul></ul><ul><ul><li>Be sure to secure the property when leaving </li></ul></ul><ul><ul><li>You should accompany every visitor when touring a HUD property. This includes buyers, inspectors, appraisers, or any other company or individual performing services </li></ul></ul><ul><ul><li>Note: Failure to abide by these policies can result in cancellation of the sale transaction and forfeiture of the earnest money deposit. In addition, bidding privileges for the selling agent and brokerage firm could be suspended </li></ul></ul>
  22. 22. Bidding Process <ul><li>All HUD homes are sold via an online electronic bidding process </li></ul><ul><li>Only brokerages with an active NAID number may place bids on buyers behalf </li></ul><ul><li>Bids may be submitted 24/7, but are not reviewed over Holidays or weekends </li></ul><ul><ul><li>Daily bid deadline is at 11:59pm CST </li></ul></ul><ul><li>On the bid deadline day all offers are reviewed and then accepted, rejected, or counter-offered </li></ul><ul><ul><li>Winning bids are usually posted at Noon the day after the close of bidding </li></ul></ul><ul><ul><li>Backup offers are noted and carried along with the winning bid </li></ul></ul><ul><ul><li>If two acceptable bids are the exact same amount, there is a random electronic drawing </li></ul></ul><ul><ul><li>Bid Confirmation number will be provided </li></ul></ul>
  23. 23. Bidding Process (cont’d) <ul><li>Complete the sales contract with your buyer PRIOR to bidding </li></ul><ul><li>All contracts MUST be completed using blue ink </li></ul><ul><li>Your buyer’s signature is your permission to place a bid on their behalf </li></ul><ul><li>If your offer is accepted, you will be notified via email </li></ul><ul><li>You will have only two (2) business days to submit the entire contract package to the Asset Manager </li></ul><ul><ul><li>The appropriate asset manager can be found on the “Agent Info” found in the information section of the property description at www.HUDHomestore.com </li></ul></ul>
  24. 24. Bidding Process (cont’d) <ul><li>The information entered on the bid submission page will become the first page of the sales contract </li></ul><ul><li>Closing costs-Line 5 </li></ul><ul><ul><li>HUD will allow up to 3% of the purchase price to go towards closing costs. Enter the numeric figure, not a percentage </li></ul></ul><ul><li>Commission-Line 6a </li></ul><ul><ul><li>HUD will allow up to 3% of the purchase price to go to the selling agent; the form will auto populate the listing agents commission </li></ul></ul><ul><li>Note: Lines 5 and 6a will be deducted from the offer price and will affect the net amount paid to HUD </li></ul>
  25. 25. HUD’s “as is” policy <ul><li>HUD makes no representation or warranty to the condition of the property </li></ul><ul><li>The purchaser is responsible for taking the necessary steps to determine the condition of the property </li></ul><ul><li>Initial property inspection reports are conducted and may be found at www.HUDHomestore.com . These are preliminary and not meant to replace a traditional home inspection </li></ul><ul><li>Buyers do not acquire any liens or bills from previous owner </li></ul>
  26. 26. Bidding over the “as is” value <ul><li>The “as-is” value is the appraised value </li></ul><ul><li>You can NOT get a 2 nd appraisal when using FHA </li></ul><ul><li>Overbidding requires submission of proof of funds; overage must be cash at closing and cannot be financed </li></ul><ul><li>Notice to Purchaser Addendum must be completed and submitted with contract package </li></ul>
  27. 27. Sales Contract Package <ul><li>ALL necessary documents must be delivered to the appropriate Asset Manager within 2 BUSINESS DAYS </li></ul><ul><li>YOU MUST ALSO ELECTRONICALLY SUBMIT: </li></ul><ul><ul><li>HUD-9548 Sales Contract and Conditions of Sale </li></ul></ul><ul><ul><li>HUD-9548 Contract Addendum </li></ul></ul><ul><li>A populated version of the contract package will be available for you to print from the Final Offer Submission Page and from you HUD Home Store Selling Account </li></ul><ul><li>A complete sales contract package will include: </li></ul><ul><ul><li>HUD-9548 Sales Contract and Conditions of Sale </li></ul></ul><ul><ul><li>HUD-9548 Contract Addendum </li></ul></ul><ul><ul><li>Lender Letter/Prequalification </li></ul></ul><ul><ul><li>Original Earnest Money Check and Earnest Money Certification Form </li></ul></ul><ul><ul><li>“ For Your Protection: Get a Home Inspection” form </li></ul></ul><ul><ul><li>Radon Gas and Mold Notice </li></ul></ul><ul><ul><li>Forfeiture and Extension policy </li></ul></ul><ul><ul><li>Forms that may be required: </li></ul></ul><ul><ul><ul><li>Lead Based Paint </li></ul></ul></ul><ul><ul><ul><li>Flood Zone Addendum </li></ul></ul></ul><ul><ul><ul><li>Owner occupant certification </li></ul></ul></ul><ul><ul><ul><li>Notice to Purchaser </li></ul></ul></ul>
  28. 28. Sales Contract <ul><li>http://www.hud.gov/offices/adm/hudclips/forms/files/9548.pdf </li></ul>
  29. 29. Avoid common mistakes! <ul><li>Include buyer’s social security numbers </li></ul><ul><li>The buyer’s name must match exactly on lines 1, 2 and 13 </li></ul><ul><li>All signatures must be in BLUE INK </li></ul><ul><li>All purchasers initials on line 12 acknowledging the earnest money policy </li></ul>
  30. 30. Contract Corrections <ul><li>Must return corrected contract no more than 2 business days from notification that correction is needed </li></ul><ul><li>Contract will be awarded to next highest bidder if the contract is returned still containing errors </li></ul><ul><li>May require a new contract package </li></ul><ul><li>You cannot use white out or liquid paper on any contract documents! This may mean that you must write a new contract and obtain your buyer’s signatures again </li></ul>
  31. 31. Earnest Money <ul><li>Deposit Amounts (certified funds only) </li></ul><ul><ul><li>$500 for sales price less than $50,000 </li></ul></ul><ul><ul><li>1% of sales price for properties $50,001 and up </li></ul></ul><ul><ul><li>Not to exceed $2,000 </li></ul></ul><ul><li>EM is payable to HUD at “US Department of HUD” </li></ul><ul><li>EM is submitted with the contract package to the Asset Manager-the AM will submit the EM to the closing agent. The contract will not be executed without the physical earnest money check </li></ul><ul><li>May be entirely or partially refunded, refer to Forfeiture and Extension policy for more information </li></ul>
  32. 32. Inspections <ul><li>Buyers are strongly encouraged to do their own inspection </li></ul><ul><ul><li>Property will be winterized unless located within a multi-family community in which the water is managed by the HOA </li></ul></ul><ul><ul><li>Read through the Property Conditions Report; if it states “Water Conditions Unsatisfactory” then the water cannot be turned on and an air pressure test must be conducted </li></ul></ul><ul><ul><li>Inspections must happen within 15 day due diligence period </li></ul></ul><ul><ul><li>Inspections may be conducted only after you receive permission from the Field Service Manager </li></ul></ul><ul><ul><ul><li>Field Service Manager contact information for properties not currently on the market can be found at www.HUDHomestore.com by clicking the Property Contacts tab on the homepage </li></ul></ul></ul><ul><ul><ul><li>You will be given 48 hours to conduct inspection and must turn off utilities after inspection </li></ul></ul></ul><ul><li>It is a good idea to complete a walk through with your buyer the day before closing. Report any issues to listing broker. If the lockbox is removed, coordinate getting a key from the listing agent </li></ul>
  33. 33. Extensions <ul><li>Extensions are purchased and granted in 15 day increments </li></ul><ul><li>Fee must be submitted in certified funds with the request form not less than 5 days prior to expiration date </li></ul><ul><li>Fees are as shown in the chart </li></ul>Sales Price Fee per day Total $0-25,000 $25 $375 $25,001-$50,000 $25 $375 $50,001+ $25 $375
  34. 34. Canceling the Contract <ul><li>Use the “Contract Release” and “Earnest Money Disposition” found on www.HUDHomestore.com </li></ul><ul><li>Submit the forms prior to the expiration of sales contract </li></ul>
  35. 35. Closing Costs <ul><li>Buyer must make a specific request to HUD to pay a portion of the closing costs </li></ul><ul><li>The following are closing costs automatically paid by HUD: </li></ul><ul><ul><li>Condo or HOA transfer fees </li></ul></ul><ul><ul><li>Costs to provide condo docs to purchaser </li></ul></ul><ul><ul><li>Recording fees </li></ul></ul><ul><ul><li>Settlement or Closing agent fees for HUD’s designated closing agent. If purchaser chooses an alternative closing agent, then it is at the purchasers cost </li></ul></ul>
  36. 36. Closing Costs (cont’d) <ul><li>The following closing costs MAY be paid by HUD (Max 3%): </li></ul><ul><ul><li>Appraisal fees </li></ul></ul><ul><ul><li>Credit Report </li></ul></ul><ul><ul><li>Flood certification </li></ul></ul><ul><ul><li>Loan discount points (up to 3%) </li></ul></ul><ul><ul><li>Loan origination fees (up to 1%) </li></ul></ul><ul><ul><li>Recording fees, transfer taxes, or fees </li></ul></ul><ul><ul><li>Survey (if required by lender) </li></ul></ul><ul><ul><li>Title insurance coverage for Lender and Owner </li></ul></ul><ul><ul><li>Home Inspection (including mold, radon, and LBP) </li></ul></ul><ul><li>Closing costs NOT paid by HUD: </li></ul><ul><ul><li>Prepaid escrows/reserves for association dues </li></ul></ul><ul><ul><li>Prepaid Homeowners insurance or property taxes </li></ul></ul><ul><ul><li>Prepaid flood insurance </li></ul></ul>
  37. 37. After Closing <ul><li>Buyer may now de-winterize and occupy the property </li></ul><ul><li>Buyer should, at their own expense, have the property re-keyed </li></ul><ul><li>Buyer will not receive garage door openers, mailbox keys, etc. </li></ul>
  38. 38. Additional Questions <ul><li>Please visit www.HUDHomestore.com </li></ul><ul><li>or the HUD buyers site at: </li></ul><ul><li>http://www.hud.gov/offices/hsg/sfh/reo/reobuyfaq.cfm </li></ul>

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