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Brokers’ Guide to Selling HUD Homes

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Presentation on theme: "Brokers’ Guide to Selling HUD Homes"— Presentation transcript:

1 Brokers’ Guide to Selling HUD Homes

2 What is a HUD Home? 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

3 Asset Management Changes
Effective October of 2010, HUD awarded contracts to multiple Asset Management companies who market HUD properties A new website, will have all properties available for bidding The appropriate Asset Manager (AM) for each property can be found under AGENT INFO

4 How to show and sell HUD Homes
Licensed real-estate brokers who are registered with HUD may show and submit offers on behalf of buyers 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 For more information and to register, please go to

5 Listings and Selling Agent Account
New listings are available daily and can be found at You will need to create a Selling Agent Account at prior to placing a bid for buyers. This requires the brokerage’s NAID number Go to the upper right corner and click “bidder” to register as a selling agent Brokers can also check the status of their bids at This site is also available to the public to search for active listings

6 Property Condition Codes
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 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 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

7 Property Condition Codes (cont’d)
F: Property is located in an area where coverage under the National Flood Insurance Program may be required in order to obtain a loan HOA: Property is located within a Homeowner’s Association which will most likely require HOA fees and dues LBP: Property was built before 1978 and may contain lead-based paint; an LBP Addendum form must accompany the sales contract

8 Additional info about IE
Repair Escrow only applies FHA 203(b) financing Not a gift from HUD Escrow amount is added to the mortgage, but sales price remains the same 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 Lender is responsible for repairs and making sure contractor is licensed No repairs may be done prior to closing

9 Listing Periods Property listings are updated daily
For IE and IN properties, in promotion of homeownership owner occupants are given priority during the first 30 days all bids placed during the first 10 days are reviewed and on the 11th day and treated as simultaneously received Additional bids can be received and reviewed up to the 30th day. Investor bids accepted on the 31st day For UI properties are placed in the lottery period for Non-profits and Government Agencies for the first 7 days If no bids are accepted properties are placed in the exclusive owner occupants period for the first 5 days Investor bids are accepted on the 6th day

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 11th day Days Exclusive Listing Period Owner Occupants and NPO bids Bids reviewed daily Days Extended Listing Period If no OO or NPO, then investors can bid; Bids reviewed daily Days 181+ $1.00 to local governments

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 6th Day Days Extended Listing Period If no OO or NPO, then investors can bid; Bids reviewed daily Days 181+ $1.00 to local governments

12 HUD’s Special Programs
There are several special programs offered by HUD: Good Neighbor Next Door (GNND) First Look Program Asset Control Area (ACA) $1 homes

13 Good Neighbor Next Door
Properties located within a designated revitalization area may be offered to Firefighters, EMT’s, Teachers, and Police 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) Buyer cannot have owned a property in the last 12 months Buyer cannot have participated in GNND before Note: If you are the Co-Listing Broker on a property sold under the GNND program, you DO NOT receive a commission

14 Good Neighbor Next Door
Can be any type of financing or cash transaction If FHA, must qualify for 100% of the price HUD will not pay for any closing costs OR real estate commissions Buyers who wish to participate in the program must submit a 100% list price offer GNND properties are available for 7 days before they are for sale to the public Eligible buyers are selected by lottery from those who indicate a willingness to buy and meet all of the requirements and restrictions Note: If you are the Co-Listing Broker on a property sold under the GNND program, you DO NOT receive a commission

15 First Look Sales Method
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 Properties are available for First Look purchase for 14 days prior to listing to the public Eligible NSP grantees may acquire these properties with the assistance of NSP funds for any eligible use under NSP, including rental or homeownership Available through May 31, 2013 Note: If you are the Co-Listing Broker on a property sold under the First Look program, you DO NOT receive a commission

16 Asset Control Areas Foreclosed properties that are located in a designated ACA are first offered for sale to an ACA participant 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 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 Note: If you are the Co-Listing Broker on a property sold under the ACA program, you DO NOT receive a commission

17 $1 HUD Homes 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 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 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 Note: If you are the Co-Listing Broker on a property sold under the $1 Homes program, you DO NOT receive a commission

18 FHA Loans FHA loans are available and may be the best deal for your buyers. FHA loans feature: Low down payment Low closing costs Easy credit qualifying

19 FHA Loans (cont’d) Who Benefits? First time home buyers Fixer-uppers
Can buy with as little as 3.5% down payment Fixer-uppers Remodeling or repair costs can be included in your loan Energy efficiency improvement can be included in your FHA loan Seniors may qualify for a reverse mortgage on their current home if: 62 or older Living in your home Own home outright or have a low loan balance Manufactured and Mobile Homes may qualify for FHA financing

20 FHA Loans (cont’d) For more information:
For information about local programs in your area: To find an FHA lender: To talk to a HUD Housing Counselor:

21 Access to Properties Lockboxes MAY be on many HUD properties
Appointments are required in order to track showings You MUST sign and date the sign-in sheet upon entering the property Do not leave a business card Be sure to secure the property when leaving You should accompany every visitor when touring a HUD property. This includes buyers, inspectors, appraisers, or any other company or individual performing services 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

22 Bidding Process All HUD homes are sold via an online electronic bidding process Only brokerages with an active NAID number may place bids on buyers behalf Bids may be submitted 24/7, but are not reviewed over Holidays or weekends Daily bid deadline is at 11:59pm CST On the bid deadline day all offers are reviewed and then accepted, rejected, or counter-offered Winning bids are usually posted at Noon the day after the close of bidding Backup offers are noted and carried along with the winning bid If two acceptable bids are the exact same amount, there is a random electronic drawing Bid Confirmation number will be provided

23 Bidding Process (cont’d)
Complete the sales contract with your buyer PRIOR to bidding All contracts MUST be completed using blue ink Your buyer’s signature is your permission to place a bid on their behalf If your offer is accepted, you will be notified via You will have only two (2) business days to submit the entire contract package to the Asset Manager The appropriate asset manager can be found on the “Agent Info” found in the information section of the property description at

24 Bidding Process (cont’d)
The information entered on the bid submission page will become the first page of the sales contract Closing costs-Line 5 HUD will allow up to 3% of the purchase price to go towards closing costs. Enter the numeric figure, not a percentage Commission-Line 6a 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 Note: Lines 5 and 6a will be deducted from the offer price and will affect the net amount paid to HUD

25 HUD’s “as is” policy HUD makes no representation or warranty to the condition of the property The purchaser is responsible for taking the necessary steps to determine the condition of the property Initial property inspection reports are conducted and may be found at These are preliminary and not meant to replace a traditional home inspection Buyers do not acquire any liens or bills from previous owner

26 Bidding over the “as is” value
The “as-is” value is the appraised value You can NOT get a 2nd appraisal when using FHA Overbidding requires submission of proof of funds; overage must be cash at closing and cannot be financed Notice to Purchaser Addendum must be completed and submitted with contract package

27 Sales Contract Package
A complete sales contract package will include: HUD-9548 Sales Contract and Conditions of Sale HUD-9548 Contract Addendum Lender Letter/Prequalification Original Earnest Money Check and Earnest Money Certification Form “For Your Protection: Get a Home Inspection” form Radon Gas and Mold Notice Forfeiture and Extension policy Forms that may be required: Lead Based Paint Flood Zone Addendum Owner occupant certification Notice to Purchaser ALL necessary documents must be delivered to the appropriate Asset Manager within 2 BUSINESS DAYS YOU MUST ALSO ELECTRONICALLY SUBMIT: HUD-9548 Sales Contract and Conditions of Sale HUD-9548 Contract Addendum 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

28 Sales Contract

29 Avoid common mistakes! Include buyer’s social security numbers
The buyer’s name must match exactly on lines 1, 2 and 13 All signatures must be in BLUE INK All purchasers initials on line 12 acknowledging the earnest money policy

30 Contract Corrections Must return corrected contract no more than 2 business days from notification that correction is needed Contract will be awarded to next highest bidder if the contract is returned still containing errors May require a new contract package 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

31 Earnest Money Deposit Amounts (certified funds only)
$500 for sales price less than $50,000 1% of sales price for properties $50,001 and up Not to exceed $2,000 EM is payable to HUD at “US Department of HUD” 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 May be entirely or partially refunded, refer to Forfeiture and Extension policy for more information

32 Inspections Buyers are strongly encouraged to do their own inspection
Property will be winterized unless located within a multi-family community in which the water is managed by the HOA 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 Inspections must happen within 15 day due diligence period Inspections may be conducted only after you receive permission from the Field Service Manager Field Service Manager contact information for properties not currently on the market can be found at by clicking the Property Contacts tab on the homepage You will be given 48 hours to conduct inspection and must turn off utilities after inspection 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

33 Extensions Extensions are purchased and granted in 15 day increments
Sales Price Fee per day Total Extensions are purchased and granted in 15 day increments Fee must be submitted in certified funds with the request form not less than 5 days prior to expiration date Fees are as shown in the chart $0-25,000 $25 $375 $25,001-$50,000 $50,001+

34 Canceling the Contract
Use the “Contract Release” and “Earnest Money Disposition” found on Submit the forms prior to the expiration of sales contract

35 Closing Costs Buyer must make a specific request to HUD to pay a portion of the closing costs The following are closing costs automatically paid by HUD: Condo or HOA transfer fees Costs to provide condo docs to purchaser Recording fees 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

36 Closing Costs (cont’d)
The following closing costs MAY be paid by HUD (Max 3%): Appraisal fees Credit Report Flood certification Loan discount points (up to 3%) Loan origination fees (up to 1%) Recording fees, transfer taxes, or fees Survey (if required by lender) Title insurance coverage for Lender and Owner Home Inspection (including mold, radon, and LBP) Closing costs NOT paid by HUD: Prepaid escrows/reserves for association dues Prepaid Homeowners insurance or property taxes Prepaid flood insurance

37 After Closing Buyer may now de-winterize and occupy the property
Buyer should, at their own expense, have the property re-keyed Buyer will not receive garage door openers, mailbox keys, etc.

38 Additional Questions Please visit
or the HUD buyers site at:

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