Finally......an answer to our prayers!!!!! HUD has finally adopted a new policy to handle people who unnecessarily "tie-up" great HUD owned homes for months only to terminate the contract because they realize that they have to come to the table with thousands of dollars....Let me sum it up for you...
Here's the scenario....
Buyer finds excellent HUD deal on a home that's being offered for it's "as is" value at $110,000. Buyer, who's approved for $150,000 (FHA Loan) wants the home really badly. The Realtor advises that HUD-owned properties are hot commodities and that this one will solicit multiple bids and that, if he really wants it, he has to really jump high on the bid amount. Since the Buyer is qualified for $150,000, he decides to bid $130,000 to ensure that he has the winning bid.....Besides, comps within the area are selling in the $140,000 range and he's sure that it's well worth it. Dude wins the bid (big surprise). His Realtor gets the signed contract w/ a copy of the earnest money deposit, and pre-approval to PEMCO within the requisite two days and the process begins. About a week later, the Realtor receives the fully executed contract. Two days letter, here comes the Welcome Letter from the Closing Attorney. Realtor provides a copy of the contract to the lender and the file is forwarded to the processor. After about two weeks later, the lender asks the Realtor for a copy of the appraisal. Realtor supplies the appraisal provided by HUD......and.....Oops! Lender tells Realtor that the appraisal is only for $110,000 and that his client has to come to the table with $20,000 to cover the difference or go to HUD for a price reduction (HA!) The end result.....Buyer terminates, property goes back on the market, and another Yahoo does the same thing!!! I don't blame the Buyer....I blame the Realtor for failing to advise Buyer that the FHA UW will approve the lower of the list price or the appraised value AND you cannot submit a second appraisal to support your bid price or ask the appraiser to use different comps
However, here's HUD's solution.....
HUD has taken steps necessary to educate the Realtor on how to handle situations in which the Buyer opts to bid over the list price on their properties.
1) HUD now mandates the Broker verifies cash to cover the overbid amount...
2) HUD advises that Buyer can opt to pay cash or obtain convention financing....
3) Buyer may opt to not execute the contract
I certainly hope this helps so that we can adequately move HUD properties instead of having them in limbo for months.
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