Welcome to buying a HUD home, FREE Report by Donna R. Felker of Felker & Associates, LLC.
Buying a HUD Home is Different than Buying Other Types of Homes
HUD homes can be purchased by anyone. While many homes are affordable, this is not restricted to low-income buyer. Homes may be bought by owner-occupants (who have the first bid period for 10 days), and by investors, who can then bid along with owner occupants.
An owner-occupant purchaser is defined as a purchaser who intends to use the property as his or her principal residence; a State, governmental entity, tribe, or agency thereof; or a private nonprofit organization. Governmental entities include those with general governmental powers (for example, a city or county), as well as those with limited or special powers (for example, public housing agencies).
HUD homes are initially priced for sale at the appraised market value. The buyer may offer any price, but HUD will only agree to offers that meet their bottom line requirements. Price reductions may take place later if the home does not sell.
HUD homes are sold "As Is"
It is extremely important to understand that HUD homes are sold in "as is" condition. This means that the condition of the home when you see it is what you will be buying. HUD makes no warranties, does not guarantee the condition of any home, and does not verify that it complies with any local code or zoning requirements. You must make any necessary repairs after the purchase. HUD may make, or give you an allowance for, major system or safety repairs only if you are purchasing with an FHA-insured loan. Wood destroying inspections are done by HUD prior to putting the home up for sale, but are not available until the home is sold. Therefore, it is very important that you get a Home Inspection by a licensed professional prior to closing on the sale.
Deadlines must be met
When you buy another type of home, you can usually negotiate the contract and other transaction items over an unspecified period of time. When purchasing a HUD home, this is not possible. In order to be fair to all purchasers, HUD has imposed timetables that must be met, or your bid or contract will be cancelled and the home returned to the market. For example, once your bid is acknowledged as the highest net to HUD, your agent must send in a correct contract within 48 hours or the bid will be cancelled. Generally, closing must take place within 40 days. These deadlines cannot be changed.
All offers must be submitted by your broker through an electronic bidding process. The electronic bids are stored in the computer system and, at the appropriate time, calculations are automatically performed to determine the apparent highest net offer to HUD.
The apparent highest bid is acknowledged by First Preston to your broker, who is notified to send in a correct, signed sales contract within 48 hours. If the contract is not received within 48 hours or is incorrect, the home will be returned to the market or acknowledged to the next highest bidder. All acknowledged bids are subject to cancellation for prior sale, electronic error, and other conditions (see Disclaimers). An acknowledged bid does not constitute a sale; only a correct contract that is counter signed by First Preston and returned to your agent allows you to proceed to closing.
Initial Listing Period
The initial listing period, which is generally the first public listing for HUD homes, is 45 days. During this time, priority is given to owner-occupants who are buying the home as their primary residence. Priority is given for the first ten calendar days as follows:
All owner occupant offers received during the first five days of this initial period are considered to be received simultaneously. On the first business day after this period, these bids are reviewed to determine the highest acceptable offer to HUD. Right now so many of the homes in our Rio Rancho/Albuquerque area are selling in the first bid period, so when you see a new listing come up, call right away for an appointment.
If there is no acceptable bid, bids are reviewed on a daily basis for the remaining five days. Bids received at different times during the day will be considered received simultaneously, and the highest acceptable net bid will be acknowledged on the date opened. If the property remains unsold after ten days, it is made available to investors as well, and bids are reviewed on a daily basis. (Investor bids may be placed at any time but are not reviewed until the 11th day, if the property is still listed.)
Subsequent Listing Period
When a property still remains unsold after the 45 day initial listing period (which is very rare right now in the Rio Rancho/Albuquerque market), the property will be re-analyzed as soon as possible. The price may be reduced, and for five days after the price reduction, all bids are considered simultaneous, with owner-occupants given priority. After the five-day initial reduced price bidding period, then bids are reviewed daily and the acceptable bid that offers the highest net value to HUD (regardless of occupancy) is acknowledged. The ontract package must be delivered within 48 hours to the Texas office.
Very important, be ready.
If your bid is acknowledged, your broker must submit a correct HUD Sales Contract, along with other required forms and Addendums signed by you, to the First Preston Regional office within 48 hours. If you need a home loan to buy you will be required to give the bidding broker a cashiers check made out to Dept. of HUD. You will be required to submit proof of financing commitment form a lender or cash to close, along with other items. You should be working with your broker to put the required items in place before you bid on a home, so that you are ready when the time comes.
Closing on a HUD home
Closings are generally within 45-60 days and held at the closing agent office. After your contract has been received correctly, it will be signed by First Preston on behalf of HUD and returned to your agent along with a contract acceptance letter. The letter will give you up to 60 days to close. Once you are ready to close, you and your agent must schedule the date with the closing agent indicated on the letter, who also receives a copy of your contract. First Preston does not set the closing date; it is up to you.
Who pays for what?
If you use the HUD closing agent (title company), HUD pays their fees. You may use your own agent (title company), but then you must pay the fees. If you use your own closing agent, they must work with the HUD agent on some legal items.
Short on cash? HUD will pay some closing and sales commission costs
HUD will pay up to 5% for standard closing cost items for the buyer (excluding the closing agent fee which is paid for separately). These items are designated by the buyer and may include discount points, loan fees, title costs, surveys, and other items. HUD will also generally pay any outstanding seller costs such as outstanding tax or utility bills which relate to HUD's ownership.
Donna R. Felker
(505) 239-4660
Donna@RioRanchoDreamHomes.com
PS. Keep in mind you will need a HUD approved Broker to help you buy a HUD home.
