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: Real Estate : HUD Programs
How to Sell HUD Homes
What Is a HUD Home?
The Federal Housing Administration (FHA), which is a part of the Department of Housing and Urban Development (HUD), provides federal mortgage insurance which ensures that mortgage lenders will be reimbursed in the event homebuyers default on the mortgage. When a lender is forced to foreclose on an FHA-insured single family home, townhome, or condominium because the owner can no longer make payments, it can file a claim with FHA for the balance due on the mortgage and convey title of the property to HUD. A HUD Home, therefore, is a one-to-four unit residence acquired as a result of a foreclosure on an FHA-insured mortgage.
How Are HUD Homes Sold?
When a HUD Home becomes available for sale, usually it is listed on the Multiple Listing Service and on HUD's home page on the Internet. Any real estate broker who is properly registered with HUD may submit contracts for purchase. Brokers are used because of their expertise in the local residential real estate market and because HUD does not have sufficient staff either to show properties to prospective buyers or to assist in those other aspects of homebuying normally handled by brokers.
Most HUD Homes are initially offered on a priority basis to owner occupant purchasers (people who are buying the home as their primary residence).
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Following the priority period, unsold properties are then available to all buyers, including investors.
HUD Homes are offered for sale at fair market value, based on a recent appraisal. Generally, HUD Homes are sold in what is known as an "Offer Period," during which a potential buyer's offer must be made. At the end of the Offer Period, all offers are opened and the bid providing the highest acceptable net return to HUD may then be accepted. Following the initial "Offer Period" homes remaining unsold are offered on an "extended" basis which means offers may be submitted any business day. If a bid on one of these homes is acceptable, the broker will usually be notified within 48 hours of HUD's acceptance of the offer.
HUD does not provide direct financing to buyers of HUD Homes. Buyers must obtain financing through either their own cash reserves or a mortgage lender.
Where Do I Begin?
It's easy to qualify to sell HUD Homes. First, you have to sign HUD's Selling Broker Certification forms. You can do this by following the Broker Registration link on the Management and Marketing Contractors page for your state. You will need to submit the following forms: SAMS 1111 Broker application and the SAMS 1111A Selling Broker Certification. Once this is completed, you can show, advertise, and submit offers on HUD Homes. Upon closing of a sale, HUD pays the broker a commission of up to five (5) percent of the selling price if this was a condition of the offer.
How Do I Learn of Available Properties?
Properties acquired by HUD will display a sign identifying who is managing the property for a while before they are listed for sale. What is happening during this time is the property is appraised, title issues may need to be resolved, and a determination is made about the property's eligibility for HUD's discount sales programs (see Good Neighbor Initiatives). Listings are posted on the Internet and the Multiple Listing Service. For more information, contact the Management and Marketing Contractor serving your area.
What Are Some of the General Sales Conditions?
HUD Homes are sold in their as-is condition without warranty. Because of HUD's as-is policy, HUD Homes can often be a great opportunity for the fixer-upper. Not every HUD Home needs fixing up, but when one does, it can be a real bargain. For example, HUD's asking price on the home will reflect the fact that the buyer will have to invest money to make improvements. Also, keep in mind that on most sales the buyer can request HUD to pay all or a portion of certain financing and closing costs.
HUD does not warrant the condition of its properties and will not pay for the correction of 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 Can I Get Further Information?
If you have more questions, contact the Management and Marketing Contractor serving your area.
Attention: Nonprofits and Government Agencies!
HUD has a special sales program under which approved nonprofit organizations and government agencies may purchase properties at discounted prices for use in local housing or homeless programs. Contact the REO Division of HUD's Homeownership Center for details.
www.hud.gov/offices/hsg/sfh/reo/hwtosell.cfm
See also:
• How to Buy a HUD Home
• How to Sell HUD Homes
• Federal Housing Administration FHA
• First Time Home Buyers Questions
• List of HUD Housing Counseling Agencies
• Glossary of Real Estate Terms - A's
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