Selling HUD Homes

What is a HUD Home?
When someone with a Federal Housing Administration (FHA) insured mortgage can't meet the payments, the lender forecloses on the home; FHA pays the lender what is owed; and then the United States Department of Housing and Urban Development (HUD) takes ownership of the home. Then HUD sells it at market value as quickly as possible. MCB is a Marketing and Management contractor for HUD 1 to 4 unit residential properties. They will maintain and sell these properties in accordance with HUD guidelines.

How are HUD Homes Sold?
HUD homes are listed on the local Multiple Listing Service (MLS) and on the internet. Registered brokers and agents may place bids electronically on these properties on behalf of a purchaser. The bid with the highest acceptable net to HUD is selected as the provisional winner subject to timely receipt of all required documents.

Who can buy a HUD Home?
Any individual who can qualify for a mortgage or who can pay cash may purchase a HUD home. Purchasers must use a broker or agent who is registered with HUD to place a bid on a property. Purchasers must also have a pre-qualification letter from a lender or proof of cash funds in the amount of or greater than the property they are purchasing.

Who can sell a HUD Home?
Any licensed real estate agent or broker who is registered with HUD may show and submit bids on HUD Homes. Please be sure to register with HUD PRIOR to working with a prospective purchaser.

Important Information about HUD Homes

HUD’s “AS-IS” Policy
All HUD homes are sold strictly “AS-IS”, this includes the responsibility of the purchaser to de-winterize the property. HUD does not make any repairs. There are no representations or warranties, expressed or implied, on any HUD property. HUD does not guarantee the condition of any property, FHA-insurable or not, nor whether it meets local codes or zoning requirements. Brokers should advise purchasers that there may be code and/or zoning violations on these properties and that it is the responsibility of the purchaser to identify these violations. Buyers are encouraged to have homes inspected by a qualified home inspection company to satisfy themselves as to the condition of the property at the time of sale.

Allowable Closing Costs -Line 5 of Sales Contract (HUD 9548-1/99)
HUD will pay up to a maximum of 3% of the purchase price, (Line 3 of sales contract), towards allowable purchaser closing costs, not to exceed actual costs incurred. Any monies remaining after the allowable closing costs have been paid will not be credited to the purchaser(s) at sales closing. These costs may only be used for specific items as stated on the Forfeiture and Extension Policy. It is extremely important that your purchaser is made aware of what these closing costs may and may not be used for. The following is a complete list of those HUD allowable closing costs that may be credited towards Line 5 of the Sales Contract.

Closing costs paid by HUD if closing costs (line 5) were entered on the bid and sales contract:

• Appraisal Fee: For an FHA 203(k) loan that is necessary to determine the “after rehab” value; for a new appraisal where the appraisal expired prior to Sales Contract execution.
• Credit Report: Up to $20
• Flood Certification: If property is offered with FHA insurance and is on a Flood Plain
• Home Inspection: Includes testing for lead based paint, radon, mold, etc
• Loan Discount Points: Up to 3% to buy down the rate, with certification from lender
• Loan Origination Fees: Up to 1% will be paid on Conventional/FHA loans; up to 1.5% will be paid on FHA 203(k) loans
• Recording fees and Transfer Charges for Mortgage: If sufficient funds are on Line 5, fees will be paid; otherwise, these are the purchaser’s costs.
• Survey: If required by Lender
• Title Insurance Coverage for Lender: If sufficient funds are on Line 5
• Title Insurance Coverage for Owner: If sufficient funds are on Line 5
• Homeowner’s Warranty: $200 - $400 depending on State; Check HUD Notice H 2001-13
• Prepaid and escrow items: For owner occupant purchasers only

Closing costs automatically paid by HUD:

• Pro-ration of property taxes and any special assessments such as HOA fees, utility bills: Paid by HUD automatically
• Settlement or Closing Fee: HUD will pay HUD’s closing agent; if another Agent is used, this is the purchaser’s cost.
• Transfer Charges and Recording Fees: For the deed only, paid by HUD automatically
• Condominium or HOA Transfer Fee: If applicable
• Repair Escrow Fee: Where applicable

Selling Agent Commissions - Lines 6 of Sales Contract (HUD 9548-1/99)
HUD will pay a selling broker commission of up to 5% of the purchase price.

Access to the Property
Owner Occupant and Investor purchasers MUST be accompanied by a broker or agent when viewing any HUD home listed for sale. Buyers may not enter a house without their broker/agent for any reason prior to closing. If there are difficulties gaining access to a property please contact the local Listing Broker. Lists of local listing brokers may be found on the website.

Brokers and/or agents must accompany any individual performing services such as home inspections, appraisals, or certifications. Brokers and agents may only use their keys for their own legitimate use. Keys are not permitted to be lent to any other individuals associated with any sales transactions.

Repairs, Improvements, or Occupancy Prior to Closing
No work is to be done to ANY HUD property prior to the close of the transaction. An accepted bid is NOT a transfer of ownership. Purchasers do not own the home until it is recorded in their name. Purchasers may not use the home for storage of personal items or occupy the premises under any circumstances.

Occupying or working on a HUD home prior to the close will be treated as trespassing. Failure to abide by this policy can result in the cancellation of the sale transaction, forfeiture of the earnest money deposit and may also involve suspension of bidding privileges for the selling agent and brokerage firm.