Successfully Selling HUD Homes. Bobby Mahan Selling Paradise Realty (239)541-5578. Overview. 3 Florida HUD Companies HUD HOMES ARE EASY TO SELL! What Is a HUD home? Showing & Advertising A HUD Home Listing & Bidding Timelines How To Submit An Offer On A HUD Home
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Successfully Selling HUD Homes Bobby Mahan Selling Paradise Realty (239)541-5578
Overview • 3 Florida HUD Companies • HUD HOMES ARE EASY TO SELL! • What Is a HUD home? • Showing & Advertising A HUD Home • Listing & Bidding Timelines • How To Submit An Offer On A HUD Home • What To Do Once You Have An Accepted Bid • HUD Contracts • Closing Procedures • Incentives
Expectations For Agents Quality In all work and all aspects of working with HUD & this process. Professionalism When interacting with the buying public, other selling agents & everyone/every aspect involved in the HUD Selling Process. Communication With not only buyers and those involved with your transaction, but also with the Asset Manager, to express concerns or suggestions/ideas that become evident to you as you work in the field and become involved in HUD selling. Motivation To make the sales and move HUD Properties! Teamwork As a real estate community and with PEMCO to work toward the continued betterment of the Florida HUD sales process and ensure that the HUD process is always operating as successfully as possible.
What Is A HUD Home? • Definition: A 1 to 4 unit, single family residence acquired as a result of a foreclosure on an FHA-insured mortgage. • Vary in price, location, and condition • NOT Necessarily low-end housing! • Offer for sale at fair market value, by FHA certified appraiser • Sold AS-IS
As-Is Sale • No warranties, guarantees, or representations about the property, FHA Insurable or otherwise. • No repairs. – Exception: “Safe, Secure, Marketable” • Buyers allowed and encouraged to get independent Home Inspections. - Buyers do not typically acquire bills/liens.
Who Can Buy a HUD Home? ANYONE!! Three Types of Bidders • Government Agencies • Owner Occupants • Given priority during certain bidding periods • Must occupy the house for 1 year • CANNOT participate in HUD sales for 2 years after purchase • Investors • Different bidding cycle than Owner Occupants • No restriction on quantity
You CAN Advertise HUD Homes • Do advertise HUD homes in a professional and ethical manner • Do not imply exclusivity • Be positive and proactive in your HUD home advertising- Get creative! • Do not say “Foreclosure”, “Distressed”, or any other negative terms • Refer to HUD homes as simply “For Sale” • Do not place sign on HUD property yard
Advertising HUD Homes continued • Always use Equal Housing Opportunity Logo • Always include HUD-Home Disclosure and link to www.hudhomestore.com
Showing HUD homes • HUD properties will have a lockbox on them • Combo • Never give the code to a client • Report missing keys or lockbox to SPR
Showing Guidelines • You must sign the sign-in sheet • Always secure the property when you leave • No open houses • Listing brokers may hold an open house
Home Ownership Incentives $100 Down! • Available to owner-occupant buyers who purchase a HUD Home w/ FHA Financing. - Indicate on Line 4 - Lender MCAW form - BUYER STILL RESPONSIBLE FOR EARNEST MONEY DEPOSIT.
Incentives - Broker Bonus • Closing: Up to day 34 $600 • Closing: Days 35 to 39 $450 • Closing: Days 40 to 43 $300 • The words “BROKER BONUS” must be written or typed at the top of the signed Sales Contract. • DON’T FORGET YOUR LOAN COMMITMENT LETTER! • Selling broker MUST complete & sign the HUD “broker incentive notice.” (found on hudpemco.com) • The Asset Manager will notify HUD’s closing agent in writing of the amount of the broker bonus. • The Asset Manager will be responsible for verifying the amount of the broker bonus during their review of the preliminary HUD-1.
Broker Bonus Exclusions • The selling broker will not be eligible to receive a bonus for any property advertised by the Asset Manager as “hard-to-sell”. • IMPORTANT: The Atlanta Homeownership Center will NOT consider any appeals submitted by the selling broker for properties that fail to close within the aforementioned timeframes. NO EXCEPTIONS.
COMMISSIONS $$$ • Sales Price < $40,000 • Minimum commission will apply • Sales Price >$40,000 • Regular HUD commission standards apply • IMPORTANT: • Remember, price is the indicator • If HUDhomestore.com has incorrectly marked a listing as eligible/ineligible for the appropriate commission make sure contact the asset manager before placing a bid • Once a bid is awarded, cannot change a commission.
HUD’s Special Programs Good Neighbor Next Door • Designed to enhance urban communities by offering discounts on HUD homes to Firefighters, EMT’s, Police & Teachers. - 50% off the property list-price - Can combine with $100 down payment FHA incentive • Requirements: • Property must be located in a designated Revitalization Area. • Buyer must live in the home for at least 36 months • Neither buyer nor spouse can have owned title to property in last 12 months. • Neither buyer nor spouse can have ever before participated in GNND program
GNND Continued… • Buyer MUST BID 100% OF THE LISTING PRICE • Buyer can utilize any type of financing or cash deal • FHA Financing on GNND: - Must qualify for entire contract amount prior to discount. - Can finance into the mortgage all reasonable and customary closing costs, including prepaids and real estate commissions. • HUD will not pay any closing costs or real estate commissions.
NSP First Look • Congress created the Neighborhood Stabilization Program (NSP) to help cities, counties & states deal w/ community problems that are the result of the mortgage foreclosure crisis. • The goal: to stabilize communities hit hardest by foreclosures & delinquencies. • HUD CPD provides funding to: • States • Insular Areas • Units of general local government • Non-profits • Consortiums
LBP Stabilization • Stipulations for HUD to complete LBP assessment: • Built Before 1978 • Owner-Occupant • FHA Financing Requests made to Field Service Manager for inspections through Asset Manager at contract execution. HUD will fund up to $4,000. For stabilization exceeding $4K, HUD will (at their sole discretion): a.) Cancel the sales contract & buyer receives 100% EM back b.)Allow to change financing to 203(k), conventional, or 203(k) streamline (only if less than $5K)
Bidding periods • Check www.hudhomestore.com for bidding periods • Lottery - Government & non-profit agencies only - 7 days. Sealed bidding- all bids are collected and then reviewed at the pull date. • Exclusive – Owner Occupant bidding - Usually 30 days, total. • Extended - when bidding is open to all parties, including investors. Bids are reviewed daily with no time limit on the period.
Creating a bidder account • Broker must have a NAID number • Easy and free • www.hudhomestore.com • Register as BIDDER in the top right corner
Listing codes • IN- Insurable • IE- Insurable with escrow • UI- Uninsurable • F- Flood Zone • LBP- Lead based paint • HOA- Home owners association
ABOUT IE – Insurable w/ Escrow • “Repair Escrow” only applies to FHA 203(b) financing. • NOT a gift from HUD. • Added to mortgage • Sales price remains the same • On the listing you will see: • Itemized list of required repairs • Total Cost of these repairs • The 110% total that will be added to the mortgage • Lender responsible for: • Repairs • Licensed Contractor • NO repairs prior to closing!!
Repair Escrow Continued… • If borrower’s home inspector or lender identify a need for more repairs: • LENDER must contact Asset Manager • Must provide detailed list of items and costs to cure • Escrow repair increased on contract, NOT added to appraisal. • IF ESCROW ADDITIONS INCREASE TOTAL TO EXCEED $5K, BORROWER MUST CHANGE FINANCING TO 201(k)
Contracts BEFORE you bid • If offer is accepted you only have two (2) days to submit the ENTIRE contract package to the asset management company. • Full contract package: • Contract • Addendums • EMD • Pre-approval or proof of funds
Closing Costs/Pre-Pains Automatically Paid by HUD • Proration of property taxes & any special assessments such as HOA fees & utility bills. • Condo or HOA Transfer Fee, if applicable. • Cost to provide condo docs to purchaser. (If paid in advance, seek prior approval to ensure reimbursement.) • $200 repair escrow hold fee, if applicable. • Recording fees for the grant deed only.
Financing • Must have pre-qualification or pre-approval (pre-approval preferred) letter when submitting an offer or a proof of funds • Make sure your mortgage lender is familiar with closing F.H.A. loans. • If applying for an FHA loan you buyer may qualify for a 203K loan. The loan offers a number of ways to update and renovate • HUD $100 down program
Submitting A Bid • Closing Cost – Line 5 • HUD will allow up to 3% of the purchase price of the property to go toward closing costs. • Commission – Line 6a • HUD will allow UP to 3% of the purchase price of the property to go toward agent commission • Line 6b will populate 3% for the Listing Broker Commission. REMEMBER: Lines 5 & 6a affect the NET TO HUD.
Offer Submission • Buyer signature is your permission to make a bid on their behalf. • All offers are submitted through www.hudhomestore.com • Bidder registration form • Confirmation number must match your bid acceptance • The listing agent/office does not have ANY information about offers that are submitted and does not take part in the selection process. • The information entered on the bid submission site will become the first page of the sales contract – MAKE SURE ALL INFORMATION IS LEGAL AND CORRECT.
Bidding Continued… • Bids can be submitted 24/7 but are not reviewed Holidays or weekends • Daily Bid Deadline is 11:59pm • No time preference in bidding • If PEMCO receives two acceptable bids which are the exact same amount, we will select the winner by randomized electronic drawing. • If you place a bid you wish to withdraw, you much cancel this bid prior to the day’s bid deadline.
Bidding OVER The “As-Is” Value • The “as is” value = the appraised value • You can NOT get a 2nd appraisal when using FHA • The Asset Manager will notify you if you overbid & requires submission of proof of funds. • Notice to Purchaser Addendum completed & submitted w/ Contract Package. • Buyer MUST bring cash to closing. • Can NOT finance • A “Subject to Value” will not support the overbid amount.
Once Your Bid is Submitted • You will receive a “bid submission confirmation number” enter this number back into HUDhomestore to check the status of your bid • LLB does not have bid information • Bidding is reviewed at the end of the sealed period or each night at 11:59pm
If You Had An Overbid • Options if you have an overbid: • If using FHA, proceed with closing and verify funds • Use cash or conventional • Cancel contract • Highest Net to HUD • Add Closing costs • 3% Buyers Agent Commission
Check Bid Results • On the bid deadline day, all offers are reviewed & then accepted, rejected or counter-offered. • Bids are usually posted at NOON the day after the close of bidding (start 2-day deadline). • PEMCO will notify you VIA EMAIL if your bid is accepted & the info will be posted on HUDHomeStore.com along with any back-up offers that may be acceptable. • The LLB will also contact you with specific instructions for submitting your contract, earnest money, & buyer select closing agents.
Counter Offers • All offers within an acceptable range of the threshold will be countered with the final acceptable net to HUD • Because your bid may not be the only offer countered, RESPOND WITH YOUR BEST OFFER. • DO NOT COUNTER WITH A COUNTER.
Once Your Bid has been Accepted • Contacts will auto-populate • Contact us to review your contract or answer questions. • You have two (2) days to get the full contract package signed in blue ink • THERE ARE NO EXTENSTIONS ON THIS TIME PERIOD. • This contract package needs to contain: 1 original contract, 1 copy of the contract, earnest money cashier check to HUD, and 1 copy of the EMD.
Bid Acceptance continued • Best way to insure that your contract will be error free • Tutorial video available at: www.youtube.com/hudpemco
EMD • Deposit Amounts (certified funds ONLY): • $500 for sales price of $50K or less • $1000 for sales price of $50,001 or more. • The selling agent is responsible for delivering earnest money on all awarded bids. • Only certified funds will be accepted. The Listing Broker will verify the correct amount of EM & name of payee. (Payee is always the closing agent.) • The Listing Broker will ensure the EM is remitted within 2 business days of contract execution to the closing agent. • EM may be entirely or partially forfeited OR refunded if the contract fails to close. Specifics are outlined in Forfeiture & Extension Policy.
Bid Cancellations • Listing Broker will be copied on emails regarding prelim bid cancellations. • Reasons for cancellation: - Failure to remit contract - Failure to submit an accurate contract package * Earnest Money will be returned to the Selling Agent by the Listing Broker - Agent/Buyer cancels voluntarily * Bid cancellation form sent to Selling Agent by Asset Mgr, to be submitted to the Listing Broker for release of funds.
HUD Sales Contract Package • Electronic HUD-9548 Sales Contract/Condition of Sale • Note that the Sales Contract for a HUD Sale is a unique contract, different from the standard FAR Contract • Electronic filing of HUD-9548 contract addendum • Owner Occupant Certification (if applicable) • “For Your Protection: Get a Home Inspection” • Radon Gas & Mold Notice • Lender Letter of Commitment/Pre-Qualification Letter • Forfeiture & Extension Policy • Lead-Based Paint Addendum (if applicable) • Flood Zone Addendum (if applicable) • Notice to Purchaser Addendum (if applicable) • BSCA Addendum • Copy of Earnest Money Check Submitted to LLB • ALL DOCUMENTS MUST BE SIGNED IN BLUE INK
FHA Amendatory Clause • Will not be executed on HUD Sales • Addendum not required; HUD Homes are exempt from the clause • The FHA Amendatory Clause is inteded to ensure that prospective home buyers with FHA-backed loans receive important information in a timely manner about the house to be purchased. IN particular, the Amendatory Clause stipulates that if buyers have not received information about the appraised value of the home they intend to buy, the buyers are not obligated to purchase the home.
Contract addendums • PEMCO: • All contract addendums can be found on www.hudpemco.com in the section for Florida forms • Hometelos: • All contract addendums can be found on www.hometelosfirst.com • These addendums are not active unless approved in writing by both buyer and seller • Addendums must be sent to the title company for asset management approval
BSCA Addendum • Contracts cannot be executed until an accurate BSCA addendum is received and a title ID is assigned. • The BSCA MUST HAVE A TITLE ID to answer “YES” to the question “Have you ever closed a HUD-owned property?” • Third Party closings under previous HUD Designated Closing Agents DO NOT COUNT. • Previous HUD Designated Closing Agents must now apply for this Title ID as well.
HUD Contracts • Send to: PEMCO HUD PEMCO- Contracts 7000 Central Parkway Suite 800 Atlanta, GA 30328 770-609-6800 800-881-9260
HUD Contracts • Send to: HOMETELOS HomeTelos, L.P. Attn: HUD Contract Review 1283 Murfreesboro Pike #200 Nashville, TN 37217
Corrections • If you receive corrections (via email) you must submit them immediately (2 BUSINESS DAYS ONLY, NO EXCEPTIONS) • only one set of corrections are allowed – contract will be canceled or awarded to the next highest bidder if returned still containing errors! • May require a NEW contract package. • Corrections can be reviewed by LLB • HUD requires asset managers to cancel a contract if corrections are not made correctly • If you contract is canceled due to correction errors you must start the bidding process over
AMENDMENTS • Changing Financing from 203(k) to ANY OTHER METHOD. - Contract LOSES 15 DAYS - RETROACTIVE: contract may now become expired, due to this reduction and an extension will need to be filed. - Support the extension w/ evidence of ability to close, so it can be approved. Fees may NOT be waived. - Buyer will be responsible for reimbursing HUD for completed termite & LBP inspections & stabilization.
AMENDMENTS • Changing Financing from other/cash to ANY TYPE OF FHA - LBP & Termite must now be ordered. * If WDO found additional time necessary for treatment & clearance. - LBP inspection 7-10 business days * If hazard found, additional time for abatement & final clearance.
Once you have a fully executed contract: Inspections • As-Is sale • You have the right to inspect and we encourage all buyers to complete a home inspection during the inspection period. • Inspection period is the first 15 days. • Inspections must be scheduled during the inspection period • The selling agent must arrange with the FSM (field service manager) to have the electric turned on • Buyer to turn the utilities on and off in their own name (or the agent’s name)
Violations, liens, ect • If you find that there are any violations, liens, inspection, or title issues please contact the listing office immediately so that we can help to fix these issues as quickly and efficiently as possible. 239-541-5578 or email@example.com
Closing Timeline • Normal Closing- 45 days • Cash Closing- 45 days • 203K Closing- 60 days