Purchasing a HUD-home or, a FHA mortgage insured home that has gone into foreclosure, is not as difficult as you may think. Whether you are looking at a HUD-home as part of the Good Neighbor Next Door (GNND) program or looking to purchase the home as an investor, there are some guidelines these homes have and you should be knowledgeable of and adhere to them to ensure your purchase. We we will go through the process of purchasing government homes from offer to closing day. Be sure to have a good reputable Realty company and Aria Spivey Ragland, MBA, MPA e-PRO, BPOR, SFR can help at every turn.
The HUD Home Process – The whole process
Purchasing a HUD home or, a FHA mortgage insured home that has gone into foreclosure is not as difficult as you may think. Whether you are looking at a HUD-home as part of the Good Neighbor Next Door (GNND) program or looking to purchase the home as an investor, there are some guidelines these homes have, and you should be knowledgeable of and adhere to them to ensure your purchase. We will go through the process of purchasing government homes from offer to closing day. Be sure to have a outstanding reputable Realty company and Aria Spivey
Who Can Buy a HUD Home?
Anyone can purchase a HUD-home, and the foreclosed homes may be purchased as an owner-occupied home or as an investor. Buyers seeking foreclosed homes on an owner-occupied basis have a ten day priority bid period over investors.
How Are They Priced?
Homes are offered at market value price or what is referred to as the appraised market value. A buyer can make any offer, but usually, they will accept only those offers close to the market value price, unless they offer a price reduction on a HUD-home that is not selling.
All these homes are sold “as is,” meaning there are no warranties, nor do they guarantee the home’s condition. Home inspections are recommended and required prior to buying a HUD-home to ensure any needed repairs will fall within your budget or if you can roll them into your new mortgage. Home inspections are ordered and paid for by the buyer and you should only hire a licensed inspector.
What Are Offer Timelines/Deadlines?
Unlike a traditional home purchase where buyer and the seller negotiate for as long as they wish, there are certain deadlines. To be fair to every buyer, the timelines that you must meet in your bid process, otherwise the bid you make on the HUD-home will face cancellation. For example, once your real estate broker sends your bid in to be considered and it is accepted as the highest bid, your real estate broker must send your signed sales contract within 48 hours of the bid or your bid will be canceled-also preference is given to closings within 45 days of bid.
How Are Bids or Offers Submitted?
You must have your bid or offer submitted through a real estate broker who is licensed to sell a HUD home. Offers are submitted through an electronic bidding process by your broker. Each bid is stored within a computer and after the set time period, the computer calculates the highest bidder automatically. Your broker is then notified if you are the winning bidder and asked to submit a signed sales contract within 48 hours of your bid. Failure to abide by the 48-hour period will cancel your bid.
How Are Homes Listed?
All new listings are released weekly each Friday morning. During the first ten days of any new listing on each Friday morning, they only accepts bids from owner-occupied bidders. It doesn’t matter if you submit a bid on day one, day five, or day ten, as long as the bid has been received electronically, all owner-occupied bids to be submitted simultaneously. On the 10th day, all owner-occupied bids will be reviewed and winning bids are posted daily at 1:00 pm. This initial 10-day period is called the Exclusive Listing Priority Period.
After the 10-day period has passed and no winning bids are confirmed, HUD will open up the bidding to the general public. These general public bids are reviewed and in the event the property still remains unsold after general public bids, all daily bids received by 11:59 pm will be reviewed and winning bid results are posted the next day by 1:00 pm. All Bids are reviewed after 1:00 pm on Friday afternoon or on Saturday or Sunday on the Monday following.
What is the Closing Process?
Once your signed sales contract has been submitted through your real estate broker within the 48 hour time period, they will acknowledge your sales contract and provide your real estate agent a letter letting you know that you now have 45 days to close. A closing agent is assigned to you and will work with your broker to ensure you close on time with all the required documents. It is important to note that if your real estate agent uses a recommended closing agent, as they will pays the closer’s fees. If you use your own closing agent, you are responsible for paying all closing cost fees.
What Else Should I Know?
If buying a HUD foreclosed home, they will pay up to 5% commission to the selling broker, or your real estate agent. They will also pay up to 3% of standard closing costs if you use one of their closing agents. They may reimburse loan origination fees of up to one percent on your new mortgage. You can also ask your real estate agent to explain how earnest money can be returned and what requirements must be met. Be sure to ask about how earnest money is refunded because if this happens to you, certain guidelines must be followed to receive all or half of your earnest money if you fail to close on the home.
What If I Need More Time?
If for any reason, you feel you and your real estate agent or financial institution can’t complete the closing process within 45 days, your real estate agent must notify the closing agent at least two weeks prior to your 45 day deadline and submit the required form “Request For Extension of Closing Date,” and you may get to extend your timeframe for another 15 days. Your real estate agent must provide appropriate documentation on why you need an extension in additional to certain monies required.
For example, with every approved extension request, they must also receive a cashier’s check, money order or other certified funds made payable to HUD that are considered extension fees. The extension fees are based on the contract sales price. For example, if the HUD-home you are purchasing is less than $25,000, you pay $10 per day or $150, homes sold at $25,001 to $50,000 have a $15 per day fee or $225. Homes that sell for over $50,000 and require the 15-day extension will pay a fee of $25 per day or $375. Whether you need to pay $150, $225, or $375, these fees must be submitted to in certified funds or money order as described above.Purchasing one of these types of foreclosure homes requires you to keep in close contact with your real estate agent, especially if you require an extension. All 15-day extensions applied for owner-occupied buyers will have no fees if your real estate agent provides the documentation indicating a timely loan and loan application was made and that your mortgage approval is very close. Further, if you are charged an extension fee, all fees are retained whether you close on time or not and then used as part of your closing costs.
