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General Questions/Buying a HUD Home
Selling Broker/Agents
Listing Broker
Electronic Bidding
HUD-9548 Sales Contract
Financing a HUD Home Purchase
Closing the Transaction
Direct Sales to Non-Profit Organizations
Good Neighbor Next Door
General Questions/Buying a HUD Home
Q. What is a "HUD Home"?
The Federal Housing Administration (FHA) is the organization of the U.S.
Department of Housing and Urban Development (HUD) that insures certain mortgage
loans for lenders. If the lender forecloses on the loan, FHA repays the balance
of the loan to the lender and the title to the home reverts to HUD. HUD then
sells these homes at market value through contractors such as Southwest Alliance.
Q: How do HUD's Management and Marketing (M&M) Contractors acquire the
house?
HUD has assigned the responsibility to maintain and sell the homes to Management
and Marketing (M&M) Contractors. They are responsible for the
upkeep of the property, and the required documentation
associated with marketing and selling the homes according to HUD policies and
guidelines set forth in the contract with the federal government. The M&M
Contractors act on HUD's behalf, but HUD retains the title to the home until
it is sold.
Q: Who can buy a HUD home? Are they only available for low-income buyers?
All HUD homes are offered without regard to race, color, religion, sex, national
origin, handicap, or familial status. Anyone who is pre-qualified for a mortgage
loan may offer to purchase a HUD home. These homes are not exclusively for
low-income buyers, but most are regarded as affordable for low to moderate-
income purchasers within the market areas where they are located. There is an
initial period when only owner occupants are allowed to purchase, after which
time investors may also buy. No employee, relative, or business relation of the
M&M Contractor or its subcontractors may purchase any of these properties.
Q: How do I start the process of buying a HUD home?
Be sure you or your broker is
registered with HUD to sell these homes. Agents can help clients get pre-
qualified for a loan, show the available homes to clients, write a Sales Contract
for the client to sign, and place an offer by electronic bid on behalf
of a client.
Q: Is it possible to get a list of the properties in my area?
You may keep informed about available HUD homes by viewing the property listings
on this web site. Simply click on
Property Listings:
HUD Owned. This information is real time, so always check before you go out with your
client to see properties.
Q: Some HUD-owned houses might not be in good condition. Does HUD make repairs?
HUD homes are sold "as is," without warranty. That means HUD generally
will not make repairs except to preserve and protect the property or to eliminate
a major safety issue. Known defects are reflected in the price and stated in the
listing on the Website, as well as on the Property Condition Summary sheet.
Q: How do I make an offer to purchase? What happens after I place a bid?
A HUD registered real estate agent or broker must place an offer in the
form of an electronic bid on behalf the client. Instructions are included in the "
Guidebook for Real Estate Professionals
". If the bid offers the highest price,
net of closing costs and commissions, above the minimum acceptable price,
then the bid will be acknowledged, assuming all other considerations are met.
The bid will become the acknowledged bid listed in "Search Offer Results,"
allowing the agent or broker 48 hours to deliver to the appropriate Regional
Office the complete and correct Sales Contract package with all addenda
signed, a copy of the loan pre-qualification letter, and the
earnest money check. A thorough description of how to complete this
all-important contract package and get it in correctly and on time is given
in the Guidebook for
Real Estate Professionals available on this site. Only
when a complete and correct contract package is submitted on time will the
M&M contractor sign on behalf of HUD as Seller. Otherwise, your bid may
be cancelled and the property may be offered to the next highest acceptable
bidder, or it may be placed back on the market for others to bid.
Q: Can I buy a HUD home as an investment property?
Yes, but owner occupant purchasers are given priority for the initial listing period that the
house is on the market for the general public. These are persons who will
affirm in writing that they have not purchased a HUD owned property in the
last two years and they will live in the home as their primary residence for
at least one year. After the initial listing period, investors may
purchase the houses for resale or for rental.
Selling Broker/Agents
Q: How do I become eligible to sell HUD homes?
The designated broker for your company or office must have a current
Name Address Identifier
number (NAID#) issued by HUD. This number allows the agents
associated with the broker to submit bids on behalf of prospective purchasers
of HUD homes. The broker (not individual agents) registers with HUD through
the M&M Contractor by completing the information on the SAMS (Single-Family
Acquired Asset Management System) forms known as SAMS 1111 and 1111A, with
attachments. Please see "
Broker Certification Forms" located under "
Forms and Instructions"
of this web site for the forms and Instructions. The registration
package should be completed correctly and sent to the M&M Contractor’s Regional
Office for the state where you are licensed. The M&M Contractor will check
the forms for accuracy and forward them to HUD who processes them and issues
the NAID#. Please allow three to six weeks for your NAID# to become active.
Q: How often do I resubmit information to HUD to keep my NAID# current?
The designated broker must update the registration information anually and/or any time there
is a change from what HUD was provided on the SAMS 1111 or SAMS1111A Forms.
Changes to the
ownership, address, telephone number, or authorized signatory should be
reported on a new SAMS 1111, with box "b" checked in the first item
and the information that needs updating clearly printed on the form. What
most brokers forget is to send in a new SAMS 1111 with a copy of the brokers
real estate license every time it is renewed. If HUD has only your expired
license on file, they may deactivate your NAID# because they have no evidence
on file that you are still legally doing business under the license laws of
your state. Regardless, your NAID number should be renewed annually.
Q: I am an agent and I have sold HUD homes before. Now that I am
licensed under a new broker who is not registered with HUD, can I just use
the old broker's FID/SSN to place bids?
No. As an agent you can only bid under the NAID# of a broker who has legal
responsibility for your actions as a licensee in your state. Your new broker
should complete the SAMS 1111/1111A as soon as possible if you want to
continue selling HUD homes.
Q: Can I bid under a temporary NAID# until my broker's application is processed?
No. Temporary NAID numbers are not available, and you must not use a different broker's NAID#.
Q: We were registered with HUD some time ago, but now cannot get to the
bid screen using our FID/SSN from before. What happened and how can we correct
it?
If your broker's license has been renewed since you first registered with HUD,
then your NAID number was probably deactivated when the license HUD has on
file expired. Complete and send in a new SAMS 1111/1111A with all attachments.
Place a check mark in box "b" to indicate that you are an
"Existing Payee." If you know your old NAID#, enter it in box 7 in
the first section. HUD may renew your old number, or issue you an entirely
new number. Use "Check Your NAID Number" to determine when your
NAID# is active again. Allow at least three weeks for processing after the
M&M Contractor has received and checked your package, and forwarded it to
HUD.
Q: How do I get a key to the HUD houses?
Keys are available from the Listing Brokers. To locate the Listing Broker
nearest you, go to the Real Estate Professionals section of the web site,
and on the left, click on Find a Listing Broker. The Listing Broker will
ask for your business card, drivers license, NAID# or other contact information.
You must never copy or loan these keys to anyone.
Q: Can I hold an "Open House" on HUD homes that are in my area?
Under special circumstances involving properties that have been on the
market for an extended period of time, the Listing Broker may be allowed to
hold an open house on a HUD home, however open houses are prohibited except
by the Listing Broker.
Listing Broker
Q: What is a Listing Broker?
The M&M Contractor has engaged Listing Brokers to list the properties in
the local Multiple Listing Services (MLS), place "For Sale" signs at
the properties, report on the condition of the houses as they are on the
market, supply keys and assistance to other brokers and agents who may sell
the houses, and generally assist to market the properties HUD owns in their
areas. They are paid a fee by the M&M Contractor. They may also be a selling broker for the properties.
However, Listing Brokers may not purchase any HUD property for themselves or
for their relatives or other affiliates. Their agents and employees are likewise
restricted from buying or selling to relatives or other affiliated persons
or business entities. You may call the Listing Broker nearest you for assistance
with any part of the HUD homes sales process. They often offer HUD home buying
training seminars that you can attend.
Electronic Bidding
Q: For owner-occupants, can an agent bid on more than one house
at a time?
Yes. If the owner-occupant is the highest bidder on multiple houses, the M&M Contractor
will choose the one that will be acknowledged for the successful bidder.
The owner-occupant will not get to choose so make sure that any home that
the agent submits a bid on is
one that the owner-occupant are prepared to close on! Please read the information on multiple
bids in the
"Guidebook for Real Estate Professionals
."
Q: How will I know if the bid I submitted is acknowledged as the highest?
Check on the web site in the "Search Offer Results" section the morning after
the bid deadline to see if yours is the acknowledged bid. PLEASE NOTE: Having
your bid acknowledged does not mean you have "bought" the house, nor
that it is "sold." The M&M Contractor must receive your complete
and correct contract package, review it for accuracy, and sign it on behalf
of HUD as the seller, and only then it is considered "contract pending."
When you "win" the bid, all that signifies is that you have the right
to submit a contract package within 48 hours. Bids are subject to cancellation
until the Sales Contract is signed because all real estate transactions must be
conducted in writing, something that cannot occur until your contract package
is checked and accepted, as indicated by the seller's signature on the documents.
If your contract package does not come in on time, or is found to be incomplete
or inaccurate, the bid acknowledgement may be cancelled and the next highest
bidder given an opportunity to submit a contract package, or the property may be
placed back on the Internet for another round of bidding. Please see our
Disclaimers section
for more information.
Q: Whose Social Security Number should be used in bidding? And who signs the Sales Contract?
The agent will get the buyer's SSN and signature on the HUD-9548 Sales
Contract before placing the bid electronically. The same name and SSN must
be used on the bid screen. If there is more than one person buying the
property together, the agent will use the name and SSN on the bid screen of
the person, whose financial statement is best from the lender's perspective,
adding the other names and SSNs on the contract following the first one.
Everyone who is buying and taking title to the property signs the contract
and addenda. These bids and contracts are not assignable to anyone else. NOTE:
Be sure to sign your name exactly the same way each time on all documents.
The names and signatures must match the SSN given for that person. You must include
the exact name as it appears on the social security card, including middle initial
or middle name.
Q: How do I cancel a bid? And, can I then enter another bid instead?
You may cancel a bid – prior to the bid being reviewed – by simply clicking
the cancel button for that bid in your "My Buyer Center". Please print
a copy of the cancellation and retain for your records.
Q: I placed a bid on a property, but the next day it is still listed
as available. Why?
Bids are reviewed the morning after a bid deadline, and results are posted,
usually before noon. If the property is still available, then perhaps it is
still too early, and all bids have not been reviewed, so posting has not yet
occurred. Check again later. The other explanation is that no current bid
was acceptable. In that case, the property would remain available for further
bidding and you may bid again.
Q: What are "Bid Statistics" and how is this different from
"Bid Results"?
Bid Results post the acknowledged bids so the buyers' agents will know to deliver
the complete contract package within 48 hours to the M&M Contractor
office. Bid Statistics provide information on what bids have been received and
whether they were acceptable or not. A property must have been on the market
for at least 12 days before bids on that property are posted to Bid
Statistics.
HUD-9548 Sales Contract
Q: How do I get a copy of the HUD contract form?
The Sales Contract is available to download and print from our web site.
Look in the Real Estate Professionals section under "Forms & Instructions." There
is an addendum required called "Electronic Filing of the HUD-9548"
stating that the document has not been altered in any way. Other addenda are
also required and available in this section. See the
Guidebook for Real Estate Professionals
for details on completing the HUD-9548.
Q: If my contract is signed, but for some reason I cancel or cannot
close, will I lose my earnest money deposit?
Per paragraph 12 of the Sales Contract, which the buyer(s) must initial, the
earnest money deposit is at risk of forfeiture if the buyer cancels without
good cause. There is an addendum to the HUD-9548 called "Forfeiture of
Earnest Money Policy." Please read this carefully because it provides
the HUD guidelines on whether and in what circumstances the deposit will be
returned or forfeited.
Q: We sent in our contract package within 48 hours of seeing our bid
acknowledged on "Search Offer Results." How will I know if everything is
okay and the contract has been signed by the M&M Contractor?
The agent sends the contract package by a delivery service that provides a
tracking system so he/she will know that it was received in time. If there
are any errors or omissions discovered when the package is reviewed, the
agent will receive an "Urgent Notice" via email at the email
address they provided or by fax. An immediate response to complete or correct the
contract package is required or the bid is cancelled. If there are no errors
or omissions, the contracts are put in line for signature by an M&M
Contractor employee who has power of attorney from HUD. After being signed,
the contract is sent back to the agent by second-day delivery service.
Remember, until your agent receives the fully executed Sales Contract,
the property is not considered to be officially under contract.
Q: How do I know how to fill out the blanks in the Sales Contract?
And what addenda are necessary?
The agent should carefully follow the "Item by Item" instructions for
the HUD-9548 provided in the "
Guidebook for Real Estate Professionals
." The Listing Broker may be consulted for assistance, and there are
training seminars offered regularly for agents, brokers, lenders, and others
who are interested in selling or purchasing HUD-owned homes. Filling out the
contract completely and correctly is the most important part of the transaction
process during the early stages prior to closing. Please read and follow the
instructions provided in the Guidebook carefully. There is a list of addenda
provided, and all documents are available in the Broker Information section under
":Forms." Agents
using BidSelectTM have "fillable" forms online to aid in
the successful completion of the contract package.
Financing a HUD Home Purchase
Q: What kinds of loans are available to purchase HUD homes?
Neither The M&M Contractor nor HUD is a lender. The following are acceptable
financing instruments for purchasing HUD houses: Federal Housing Administration
(FHA) loans, Veterans Administration (VA) loans (subject to certain restrictions),
Conventional loans and cash. Additional information may be obtained in the "
Guidebook For Real Estate Professionals
" under the "Real Estate
Professionals" section of this Web-site.
Q: Why do I have to get a pre-approval letter before I bid?
On behalf of HUD, the M&M Contractor acknowledges the bid that offers the
highest net to HUD. However, the bidder must show evidence of the financial
ability to close before a contract is entered into. This is to avoid tying up
the property with a transaction that is unlikely to close. The "
prequalification letter" must be directly from the lender (not the mortgage
broker) giving a current date and an amount of the loan that is acceptable. It
should also name the buyer(s) whose credit report was reviewed and approved by
the lender.
Q: What amounts should be filled in on the Sales Contract in the financing
paragraph, Item 4?
As the Guidebook instructs, the blanks in the FHA portion of the financing
paragraph for down payment, loan amount and number of months of the loan are
to be left blank or "TBD" may be inserted. If the house you are
purchasing was listed "IE" for
insured with escrow, you do fill in the amount of the repair escrow in the
blank for that purpose. This number is neither added nor subtracted from any
of the numbers in the column on the right side of the page.
Q: Can I use Veteran's Administration (VA) financing?
Yes, unless the VA underwriter requires the seller to make repairs prior to
closing, this may be in conflict with HUD's policy to sell homes
"as-is" except for preservation and protection of the home.
Q: The lender requires a copy of the appraisal and termite inspection report.
How can I get these documents?
The lender must directly request these reports from the M&M
Contractor. The requests are usually faxed to the regional office by the
lender.
Closing the Transaction
Q: What closing agent can I use?
On this site in the Real Estate Professionals section, there is a link that
lists the HUD Closing Agents for each area. HUD has these service providers
under a separate direct contract that gives them requirements for closing
these sales. They are paid by HUD accordingly for document preparation and
closing services. You will know who the HUD closing
agent is. If your buyer chooses to use a different closing agent, the buyer must pay these
fees, and the HUD closing agent will still be involved to provide services
to HUD as the seller.
Q: Will HUD pay for any closing costs on behalf of the purchaser?
In the Real Estate Professionals section of this website is a link for Forms
& Instructions that will help answer this question. Upon closing of a
HUD-owned home, HUD will allow deduction from its proceeds for purchaser
financing and closing costs considered reasonable and customary for the jurisdiction
in which the property is located. The buyer must indicate on HUD Form HUD-9548
(sales contract) the total dollar amount HUD is expected to pay towards a
purchaser's financing and closing costs. However, in no event may the costs
exceed three percent (3%) of the property's gross purchase price. Allowable
Closing cost information can be obtained
in the "
Forms and Instructions" section. The ceiling on costs is 3% of the
sales price in most states. Certain fees and expenses are automatically paid
by HUD and do not have to be included in the total amount filled in on Item 5,
such as an FHA appraisal and termite inspection. The Closing Agent and Listing
Broker for your area are available to assist you.
Q: How long do I have to close? What if I need more time?
Currently, transactions in most states must close within 30-60 days from the
ratification date, the date The M&M Contractor signed the Sales Contract
on behalf of HUD. If the sale involves 203k financing, 60 days are allowed.
For additional time, except in rare instances, an extension request and an
extension fee must be submitted by you to the Closing Agent. More details as
to the amount of the fee and the procedures to follow are provided in the
Guidebook for Real
Estate Professionals.
Direct Sales to Non-Profit Organizations
Q: What type of non-profit organizations can purchase HUD homes?
HUD requires that non-profits organizations (NPOs) submit an application
describing their housing related mission and providing other information
about their organization's structure, financing, and management. After this
application has been reviewed and approved by HUD, the NPO is issued a NAID#
and may buy HUD homes directly from the web site for their purposes. The types
of non-profits vary widely, but they are almost always an IRS 501 (c)(3)
corporation.
Q: Can nonprofits get a discount? What other benefits do they qualify for?
Depending upon the location of the houses and the number of houses purchased
and closed at one time, a non-profit may qualify for either a 10%, 15% or 30%
discount at time of closing. There is also an initial 7-day listing period
when homes that are eligible for this program are listed separately, giving a
special opportunity for non-profits and other direct purchasers only to buy. Go
to the Community Advancement section of this website and click on
"Special Buyers" to get more information about non-profit purchasing.
Good Neighbor Next Door
Q: Who qualifies for the "Next Door" programs and what is their
discount?
Only full-time law enforcement officers with arrest authority, full-time
licensed teachers or administrators in public or private pre K-12 grade schools, full-time
Emergency Medical Technicians and full-time Fire Fighters may
purchase directly through the Good Neighbor program. Their discount is 50% of the
list price. Closing costs and broker commission costs can be added to the loan amount
if the buyer uses FHA financing. There are other restrictions the buyers must follow.
For example, they must reside in the home a minimum of 36 months. For more information
and requirements, please see the HUD website.
Q: Can a real estate broker receive a commission for working with an
GNND buyer?
Yes, but in no event will HUD pay selling broker commissions of closing costs. A
purchaser using FHA financing through the GNND program may include reasonable and
customary closing costs within the amount borrowed. These amounts are not properly
considered to be part of a required down payment.
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