In Part 1, the HUD Pre-Bidding and Bidding process was reviewed. Now, your bid has been accepted by HUD and yet, you are not quite under Contract although you are well on your way.
First, the Contract will be overnighted to HUD for execution; your HUD Broker will usually do the overnighting.
In the package, include the completed, signed originals and 2 copies, and retain a third copy for your files. Use the HUD Checklist to make sure all the forms are completed.
Remember to use BLUE ink only to fill out the fields in the document.
You'll choose either an Owner-Occupant or Investor Sales Package to match the bid you made. Remember that Owner-Occupant ONLY applies to a primary residence--not a second home. It is a very serious offense to fudge this. Don't go there.
(A third type of sales contract packet is the Good Neighbor Next Door Program, which requires that the Property be in a designated area of the state according to economic conditions or other criteria.)
The Contract and addenda must be filled out EXACTLY to HUD specifications. If there are any errors, the Contract will be kicked back for corrections. Don't panic if this happens, and if you have questions or do not understand, your Broker can contact HUD and get clarification. However, if your Contract is returned with corrections and any errors remain, the Contract may be cancelled and property returned to market.
The most important things to remember when filling out the Contract are:
- The Purchaser Name on lines 1, 2 and 13 MUST MATCH EXACTLY. Don't omit initials or misspell.
- On line 2, the manner of holding title must be included after the name.
- Line 4 should read, "HUD Designated Closing Agent"
- Any Conventional financing (not FHA) and cash buyers always check the LAST checkbox on line 4.
- Line 9, length of escrow is always 45 days (the instructions in the packet will confirm). It can close sooner but if close is delayed there is a hefty fee to file an extension. If the delay is not due to buyer, buyer's agent or lender (such as a HUD caused delay) you may ask for waiver of fees. Make sure you can close on time; a head start on your loan process and due diligence is wise.
- Line 11; there are almost always other addendums attached so be sure and check that box. If you're not sure, ask HUD.
Be sure and completely fill in phone numbers, SSN/TIN, and all buyer/Broker information.
When you overnight the Contract to HUD, make sure and include all the Addendums, an Agency Disclosure, copy of lender's letter/LSR and copy of the earnest deposit check.
The Utilities Turn On Addendum is super important because you cannot turn on utilities for inspections without authorization, and you won't be able to have the property inspected without utilities on. The Addendum is filled out, LEAVING DATES OF SERVICE BLANK. The Contract execution process takes about a week to 10 days and the inspection period won't begin until then...once Contract is executed and escrow is opened, the authorization will be faxed to HUD by the Broker with dates filled in and faxed back, signed by HUD. Make sure to set 3 days, with a couple of days lead time. You'll get the signed authorization usually the next day or two and then can set a time for the home to be inspected.
While you're waiting for HUD to e-mail and fax notification to your Broker that the contract is either good to go or needs changes, you should start investigating the property. Use the Arizona Buyer's Advisory or AZ Buyer's Checklist or ask your Broker to provide a blank copy of the AZ Seller's Property Disclosure Statement for a guide so you know the right questions to ask.
Next post will tell you what to expect and what happens during a HUD escrow.
DISCLAIMER: HUD is the final authority on procedure. Check with them before submitting any documentation.
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