1. Selling HUD REO Properties
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2. A Guide To Selling HUD Homes
U.S. Department of Housing And
Urban Development
October 2010
Company
LOGO

3. Today’s Agenda
 What are HUD Homes?
 Compliance, Field, and Asset Managers roles
 Who can purchase and sell HUD Homes
 Special HUD Home “incentive” programs
 Types of HUD Homes listings
 Electronic bidding and the contract
 FHA Resources

4. What Are HUD Homes?
 A HUD Home is a home where the Federal
Housing Administration (FHA)
 Insured a mortgage
 The lender foreclosed
 Lender submitted claim for payment to the
Department
 HUD paid a claim to lender on the property
 Lender deeds property to HUD
 The property owner becomes HUD

5. MORTGAGEE COMPLIANCE MANAGER
(MCM)
Responsible for reconveyances, time
extension requests, over-allowable
requests, title review, request for
occupied conveyance
Michaelson, Connor, and Boul
To date, MCM has processed over
200,000 requests

6. FIELD SERVICE MANAGER (FSM)
Field Service Managers (FSMs) provide
 Property maintenance
 Preservation services, including:
Inspecting the property
Securing the property
Performing cosmetic
enhancements/repairs
Providing on-going maintenance

7. ASSET MANAGER (AM)
The Asset Managers (AMs) are
responsible for the marketing and
sale of HUD REO property
Multiple Asset Managers in each
market

8. Santa Ana Homeownership Center
Asset and Field Service Managers
Asset Managers Field Service Managers
Area: AZ, ID, NV Area: AZ, ID, NV
BLB FIRST PRESTON
SIGMA
Area: AK, CA, HI, Area: AK, CA, HI,
OR, WA OR, WA
BLB AMS
PEMCO CITYSIDE

9. IMPACT ON REALTORS
 Commission split between listing and selling brokers
 One national web-site for all HUD listings and
property information
 www.HUDHomestore.com

10. IMPACT ON HOMEBUYERS
 Improved Customer Service
•More engagement of Local Listing Brokers
 Longer “EXCLUSIVE” period for owner
occupants on Insured Listings
• Increased to 30 Days from 10 Days
•Includes HUD-approved Nonprofits
• Investor bids considered after Day 31
 Greater Opportunity for Homeownership

11. HUD’s First Step – Prior To Listing
 Property inspected and secured by
HUD’s Field Service Manager
 Property appraised by HUD’s
Asset Manager
 Sales price determined

12. Second Step – HUD Lists Property
 Property listed on MLS & internet
 Real estate agent may show
 Prospective purchasers
 Real estate agent completes sales package
 With purchasers

13. Second Step – Continued
 Real estate agent submits bid electronically
 Bids reviewed to determine best “net” offer
 Bid acceptance posted on internet

14. Third Step – HUD Accepts Offer
 Earnest money held by Real Estate Broker
until offer accepted
 Sales Package sent via overnight mail
 If submitted sales package complete and
correct
 Sales contract signed by HUD
 Ratified
 Forwarded to HUD’s designated closing
agent
 Copy to real estate agent

15. Final Step – Closing The Sale
 Earnest money delivered to HUD’s Asset
Manger (possible exceptions for Oregon)
 Escrow opens with HUD’s closing agent
 Buyer secures financing
 Purchaser(s) perform home inspection
 Optional but highly recommended
 Sale closes with HUD’s closing agent
 Purchaser(s) re-key locks after close
 At purchaser(s) expense

16. Who Can Purchase A HUD Home?
 Any buyer that can secure a loan or can
pay cash
 Purchaser(s) must use HUD registered
REO broker/agent
 Purchaser(s) must have pre-qualification
letter from a lender or proof of cash
funds in the amount of or greater than
the property they are purchasing

17. Who Can Sell A HUD Home?
 Any licensed real estate broker
 Registered with HUD
 www.HUDHomestore.com
 Broker must be registered PRIOR to
 Broker or agent working with any
purchaser(s)
 A real estate agent
 Employed by a HUD registered broker
 All offers must be submitted through
approved broker number only

18. HUD Home
$100 Down Incentive Program
 May or may not be available for the area
 Check at: www.HUDHomestore.com
 Available only to owner-occupant buyers
using FHA mortgage insurance financing
 Owner-occupant buyer responsible for full
earnest money deposit
 FHA insured loan must be manually
underwritten
 Verify lender participates

19. Good Neighbor Next Door Program
Also Known As – GNND for HUD REO’s
 Designed to make American
communities stronger
 To help build a safer nation
 To encourage employees of eligible
groups to become homeowners

20. GNND Purchaser Benefits
 50% off HUD’s list price
 Silent second for difference
No interest
Forgiven after three years
 $100 down payment

21. GNND Requirements
 Property must be located in a designated
“Revitalization Area”
 Buyer must live in property purchasing
 36 months
 Buyer nor spouse may have owned any
property
 Previous 12 months
 Buyer nor spouse may have previously
purchased under the GNND program

22. GNND Requirements -
Continued
 Must bid 100% of listing price
 Listed on Fridays
 Can utilize any type of financing or pay
cash
 For FHA Financing
 Must qualify for entire contract amount prior to
discount
 HUD will not pay any closing costs or real
estate commissions

23. GNND Eligible Groups
Law enforcement officers
 Federal government
 State
 Unit of local government
 Indian tribal government
 Full-time employment sworn to uphold and
make arrests for violations
 Federal, state, tribal, county, township, and
municipal laws

24. GNND Eligible Groups – Cont.
Teachers
 Employed as full-time teacher
 Pre-K through 12th grade
 State-accredited public or private
school providing direct services to
students
 Must serve students from area where
purchasing home is located in normal
course of business

25. GNND Eligible Groups – Cont.
Firefighters/Emergency Medical Technician
 Employed full-time as firefighter or EMT
 Federal government
 State
 Unit of local government
 Indian tribal government
 Serving in area where the home is
located

26. Types Of HUD Home Listings
 HUD Homes are sold “as is”
 No guarantee or warranty property free of:
 Visible or hidden defects
 Termite damage
 Lead based paint
 Any other condition that renders
property uninhabitable or un-usable

27. Types Of HUD Home Listings
 Three basic listing types
 IN – Insurable
 IE – Insurable with Escrow
 UI – Uninsurable
 Conventional, Cash, or FHA
Rehabilitation Loan (203k)

28. First Type of HUD Home Listing
 IN – Insurable
 Eligible for FHA home loan insurance
 203(b) financing
 No needed repairs determined

29. Types Of HUD Home Listings
 IE – Insurable with Escrow
 Eligible for FHA financing
 “Minimum Property Repair” (MPR) repairs
 Roof, structural, mechanical systems
 Less than $5,000
 Repairs completed by purchaser after close
 Cost of repairs not paid by HUD
 May finance repair escrow amount in mortgage
 Purchase contract repair escrow amount not
deducted from “Net” to HUD

30. Types Of HUD Home Listings
 UI – Uninsurable
 Generally in need of extensive repairs
 Usually purchased with cash or conventional
financing
 Only type of FHA financing may be with
Rehabilitation Loan (203k)
 Owner occupancy required for FHA
 Minimum $5,000 MPR (Minimum Property
Repairs)
 Not all properties will qualify

31. How The Bidding Works
 All listings posted on-line at contractor’s site
 Priority given to owner-occupant buyers
 First 30 days of listing
 Once a bid is accepted cannot change
 Purchase price
 Closing cost
 Commission

32. Overbidding on HUD REO’s
 Buyer must
 Purchaser must pay difference in cash between bid
amount and “List Price” (“As-Is” appraisal)
 Increased cash investment from own funds
 Cancel contract
 Possible loss of deposit
 Second appraisals may not be ordered simply
to support a purchase price higher than value
on current appraisal

33. Electronic Bidding Process
 All HUD REO bidding is
done electronically
 Before submitting bid
 Have sales contract complete
and ready
 Have all necessary addenda
filled out completely

34. How The Bidding Works
 “Daily” deadline listings posted
 Must submit bid by 11:50 pm
 Bids submitted on Friday, Saturday, or Sunday
 Reviewed following Monday (or business day)
 Bid results posted daily by 4 pm (EST)
 More than one acceptable bid goes to highest
net to HUD bidder
 Back-up offers held
 Bids not acceptable but within a range
 Contractor announces resubmission/counter offers

35. Bid Submission
 Go to www.HUDHomestore.com
 Click a home's case number to display the Property
Details screen
 On that screen is the Submit an Offer button
 Enter Broker’s Federal Tax ID or SSN
 Fill out form
 Follow line-by-line contract instructions
 All purchaser/company information must be accurate
and match the Sales Contract
 Bid may be cancelled

36. Accepted Bids
 Bid acceptance posted on internet
 Completed hard copy of sales package
must be sent to HUD REO contractor
for ratification
 Not valid sale until ratified/signed
 Overnight mail

37. Accepted Bids – Cont.
 Contractor ratifies contract
 Ratified contract forwarded to closing
agent
 Copy to real estate agent
 Earnest money deposit delivered to
HUD’s Asset Manger (except Oregon)
 Escrow opened
 Buyer secures financing
 Sale closes

38. Closing Timeline
 Buyers utilizing FHA insured financing,
conventional, other types of financing, or
paying cash
 Escrow closing date is 45 days from contract
acceptance
 Buyers utilizing one of FHA’s Rehabilitation
Loan programs
 Escrow closing date is 60 days from contract
acceptance
 Time starts from when contract ratified

39. Other Bidding Process Notes
 Information entered on bid cannot be changed
 After offer provisionally accepted
 Owner-occupant purchasers may only have
one accepted offer at a time
 Cancellation request would have to be
processed prior to submission of a new bid
 Upon completion of cancellation process
 Faxed letter confirming and
 Notification of disposition of earnest money
deposit for cancelled offer

40. HUD’s Sales Contract
 HUD Form 9548
 Only acceptable contract used
 Examples of line items in contract
 Purchaser or purchasers names
 Offer price
 Type of financing
 Closing cost
 Agent commission
 Net to HUD
 Etc.

41. Completing the HUD Sales
Contract
 Buyers name must match exactly
 Lines 1, 2, and 13
 Bid may be cancelled if names change/different
 Purchaser(s) must have:
 Pre-qualification letter from a lender or
 Proof of cash funds in the amount of or
greater than the property they are purchasing

42. Common Problems Causing
Closing Delays
 Type of financing changed during escrow
 Buyer not fully pre – qualified before offer
 Lender is not FHA approved
 If buyer is utilizing FHA insured financing
 Agent and loan officer not communicating
with lender
 HUD sales process

43. Contract Revisions
 Changes to financing
 Addendum to Change Financing must be
completed and submitted for approval
 To contractor
 Must be revised and approved prior to close

44. Contract Revisions – Changes to
Financing Continued
 Changing from FHA Home Loan
Insurance Program (203b) to FHA
Rehabilitation Mortgage (203k)
NOTE: CANNOT change to FHA Home
Loan Insurance Program (203b)
on property that was listed as
“Uninsurable” (UI)

45. Contract Revisions – Continued
 Removal or addition of Purchaser(s)
 Must submit applicable addendum
 To contractor
 Must be revised and approved prior to close
 Minimum of one original buyer must remain if
opened file with closing agent
 Sale may be cancelled
 Deposit may be forfeited
 CANNOT change buyer “type” under any
circumstance

46. Contract Revisions - Continued
 Buyer utilizing FHA insured financing who
obtained a Home Inspection and that
inspection reveals additional repairs
 Items can be added to an Escrow Repair
 Up to $5,000 in repairs
 Repairs greater than $5,000
 Financing may be changed to a Rehabilitation
Loan (203k)

47. Contract Revisions
Additional Repairs Needed
 Lender’s Direct Endorsement Underwriter
must submit a signed request on company
letterhead
 To contractor
 Identifies revised/new dollar amount
 Purchase Contract (9548) completed to
reflect revision
 By real estate agent representing buyer
 Original to contractor

48. HUD Sales Contract Addendums
 10 total Addendums
 Six – required required
 Four – “As applicable“
 All addendums required or needed
 Must be signed
 By appropriate party/parties

49. HUD Sales Contract Addendums
 Addendum to electronic filing of
Purchase Contract (9548)
 Owner-occupancy certification (as
applicable – Required for FHA
insured financing)
 “For Your Protection – Get A Home
Inspection”

50. HUD Sales Contract Addendums
 Radon Gas and Mold Notice
 Lender’s “Letter of Commitment/Pre-
Qualification Letter (as applicable)
 On lender’s letterhead
 Signed by lender
 Lead – Based Paint Addendum (as applicable)
 Flood Zone Addendum (as applicable)

51. HUD Sales Contract Addendums
Continued
 Forfeiture & Extension Policy
 Addendum A; Revised July 13, 2009
 Addendum to Sales Contract for the HUD
Sales Incentive (if applicable)
 Copy of Earnest Money Check with the
Earnest Money Certification Form OR
evidence borrower has funds when paying
cash/cash deal

52. FHA Amendatory Clause
 HUD Homes are exempt from the
FHA Amendatory Clause
 Addendum not required
 Will not be executed by HUD on a
HUD Home sale

53. Extension Requests
 Any extension requests
 Sent to closing agent
 Not to contractor
 With applicable fees
 Must be “Certified Funds”
 Fees may be waived on first request for
buyers using FHA insured financing
 All requests must be accompanied by
sufficient documentation and evidence of
ability to close

54. Entering HUD Owned Homes
 Access to HUD owned properties is restricted
to:
 Purchaser(s) viewing when listed for sale
 Individuals performing services such as
home inspection, appraisals, or certifications
 No work allowed
 Entry must be accompanied by HUD registered
REO broker/agent at all times

55. Final Notes On Entering
 Prior to close of sale transaction on HUD Home
 No work can be done on the property
 By anyone for any reason
 Purchasers may not use home for storage
 Any personal items for any reason
 Purchaser(s) may not occupy home
 Under any circumstance
 Will be treated as trespassing

56. Where to Get More Information
 1 – 800 – CALL – FHA (1 – 800 – 225 – 5342)
 A source for all FHA questions
 Industry partners and Consumers
 www.hud.gov
 On-line resource for info about FHA and FHA
programs
 On-line source for all other HUD programs, grants,
forms, press releases, etc.
 User friendly
 www.HUDHomestore.com
 www.fhaoutreach.gov/FHAFAQ
 On-line resource to frequently asked questions

57. www.HUDHomestore.com

58. www.hud.gov

59. www.fhaoutreach.gov/FHAFAQ

60. The U.S. Department of Housing and Urban
Development
would like to thank the California Association of
Mortgage Professionals
and
Oregon Association of Mortgage Professionals
and it’s members for your interest in
FHA and FHA programs