HUD Homes
What is a HUD Home? - (Top)
The Federal Housing Administration (FHA) is part of the Department of Housing and Urban Development (HUD). It provides federal mortgage insurance to reimburse mortgage lenders if a homebuyer defaults on a mortgage. Lenders can file a claim with the FHA when forced to foreclose on an FHA-insured single family home, townhouse, or condominium because the owner is no longer able to make payments. FHA will reimburse the balance due on the mortgage and convey title of the property to HUD. A "HUD Home" is a one-to-four unit residence acquired as a result of foreclosure on an FHA-insured mortgaged loan or by other special acquisition.
How Are HUD Homes Sold? - (Top)
All properties available for purchase by the public are offered for sale at Internet listing sites maintained by HUD Management and Marketing (M&M) contractors. Generally, HUD homes are sold in what is known as an "offer period," during which a potential buyer's offer must be made. HUD offers priority and, in some cases, discounts to homebuyers with special needs:
- For disaster victims (during an initial 10-day offering period, with up to 100% discounts)
- For "good neighbor next door" participants (during a 5-day priority period for homes in revitalization areas, at a 50% discount)
- For owner-occupants during the open "offer period" (bids are collected and are opened all at once at the end)
- For any buyer during the "extended basis" period (any acceptable bid may be chosen)
HUD homes are offered for sale at fair market value based on a recent appraisal. Buyers wanting to live in the homes have first priority. At the end of the offer period, all offers are opened and the bid providing the highest net return to HUD may be accepted. During the extended basis period brokers may submit offers any business day on behalf of buyers, including investors. HUD will usually notify the broker within 48 hours if a bid is acceptable.
Any real estate broker registered with HUD may submit contracts for purchase. HUD uses brokers for their expertise in local residential real estate markets. The agency is not sufficiently staffed to show properties or provide other services normally handled by real estate professionals.
Homes are initially offered to owner-occupant purchasers who plan to use the home as their primary residence. Following the priority period for owner-occupants, unsold properties are then available to all buyers, including investors. HUD doesn't provide direct financing to buyers of HUD homes. Buyers must obtain financing through either their own cash reserves or a mortgage lender.
Any real estate broker registered with HUD may submit an offer and contract to purchase on behalf of a buyer. HUD pays the real estate broker's commission, if included in the contract.
You Can Earn up to 5% Commission! - (Top)
Upon closing of a sale, HUD pays the selling broker a commission of up to 5% of the selling price. HUD will pay the commission only if the percentage has been specified in the offer. A listing broker is paid up to 1%.
Become a Registered Real Estate Professional to Sell HUD Homes - (Top)
HUD sold more than 50,000 homes from its Real Estate Owned (REO) portfolio in each of the last two fiscal years. Purchasers submitting offers on these homes were required to use a real estate professional registered with HUD. That's where you, the real estate professional, fit in!
If you want to be able to submit offers on behalf of buyers for HUD Homes, you must be registered with HUD. No individual can use another individual's registration (for example, a managing broker's) in lieu of their own. The registration process takes three-four weeks, so don't delay, register now!
How to Register - (Top)
It's easy for licensed real estate professionals to qualify to sell HUD Homes. You must first sign and submit HUD's Broker application and Selling Broker Certification forms to the HUD contractor that handles these sales in your area.
You can do this by going to HUD's M&M contractor website, locating the contractor for your state and clicking broker or agent information or on that site. You will need to submit the following forms:
Upon completion, you can show, advertise, and submit offers on HUD Homes.
Registration is Good for One Year - (Top)
You must repeat this process annually since registrations are only valid for one year. If your registration lapses, you will be automatically removed from the list of registered brokers. Be sure to keep your registration current so that your offers can be submitted without a hitch!
How Do I Learn of Available Properties? - (Top)
Properties acquired by HUD will initially display a sign identifying the property manager prior to listing for sale. During this period HUD contractors obtain an appraisal, resolve title issues, and determine eligibility for HUD's discount sales programs. Listings are posted on the Internet and the Multiple Listing Service. For more information, contact the (M&M) contractor serving your area.
What Are Some of the General Sales Conditions? - (Top)
HUD homes are sold in "as-is" condition without warranty. This means that HUD Homes can often be a great opportunity for the "fixer-upper". Not every HUD home needs rehabbing, but when one does it can be a real bargain. HUD's asking price on the home will reflect the buyer's need to invest money for improvements. Another benefit is that on most sales the buyer can request HUD pay all or a portion of certain financing and closing costs.
HUD does not warrant the condition of its properties and won't pay for correcting 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 Does a HUD-registered Real Estate Professional Submit an Electronic Bid? - (Top)
Electronic bidding is the only method to submit offers for HUD homes. HUD-registered real estate professionals and their agents can electronically submit bids on HUD homes 24 hours a day, 7 days a week over the Internet.
All HUD home sales listings are managed by HUD's (M&M) contractors. Visit the contractor website for instructions for the quick and simple bidding process.
When you have completed the process, always review your bid and make any necessary corrections. The contractor will assign you a Bid Confirmation Number. Note it on the right hand corner of the sales contract. If you are the winning bidder, you must submit a completed, signed sales contract using HUD Form 9548, dated 1/99, to your (M&M) contractor.
How Can I Get Further Information? - (Top)
If you have more questions, contact the (M&M) contractor serving your area.
