The real answer is that almost anyone can buy a HUD Home at some point (if they can show proof of funds or have a written proof of pre-approval by a mortgage lender) but there are several "Bid Periods" that have occupancy requirements during that period. Asset Managers (AM) adhere strictly to Fair Housing Lawsin the sale of all HUD Homes.
There are 3 types of property listings based on the insurability of the property. This is determined by the condition of the property.
- IN = Insurable Listing - This property is most likely in acceptable condition for an FHA 203(b) loan, using the appraisal that HUD already has on the property (for FHA loans only)
- IE = Insurable-Escrow Listing - This property needs repairs < $5,000. If using FHA financing, the buyer can pay this out of pocket or add it to their loan. The lender should be made aware of this up front so they can make sure the loan approval includes this provision. The repairs are made after settlement, and the buyer may not occupy the property until the repairs are made and funds approved and released. If the buyer is doing an FHA 203(k) loan, then the repair escrow is immaterial as those repairs likely will become part of the rehab cost. NOTICE: The repair escrow is not paid by HUD, it is the buyers responsibility to pay. If buyer is paying cash or using conventional financing, the repair escrow is not a requirement of HUD.
- UI = Uninsurable Listing - This property needs repairs > $5000 and is not eligible for an FHA 203(b) loan, but may be eligible for an FHA 203(k) loan. Conventional financing may be an alternative, as is cash, however HUD will make no repairs.
Once the property is listed, these are the "Bid Periods" for IN and IE properties:
- 5 day Pre-Sale
Prior to being listed to the public, approved non-profits and local government agencies in pre-determined Revitalization Areas may purchase HUD Homes. Go to HudHomeStore and at bottom of page you will find Special Programs, then check your state for availability of homes in approved areas.
- Day 1-30 - Exclusive Sales Period
Owner Occupants are a priority in this period, but non-profits can also bid in this period. Bids are opened on the 16th day in no order, they are considered simultaneous. If no bid is accepted, then bids will be opened daily until a bid is accepted for the remaining days in this period.
- Day 31- 180 - Extended Sales Period
If no owner occupant has an accepted bid, then the bidding is opened regardless of occupancy status. Bids are opened daily until a bid is accepted. The AM has the right to lower the sales price and re-list. We are asked to withdraw the property from the market while in the reduction phase and then re-activate when the new price is determined, which is usually only a few days. During the re-list period, once again owner occupants have priority but anyone can bid.
The length of time for the "Bid Periods" for UI properties is different, otherwise criteria is the same.
- 5 Day Pre-Sale Criteria is the same as above
- Day 1-5 - Exclusive Sales Period Criteria is the same as above
- Day 6-180 - Extended Sales Period Criteria is the same as above
After 180 days, HUD, through Special Programs, may offer the homes to local government agencies for $1, plus closing costs. To my knowledge we do not have any $1 homes in my area (WV), so I cannot speak to that process right now.
I plan to do a blog on HUD Revitalization Areas soon, but because I do not find any homes in WV in one of these areas, I have no practical knowledge of the process, but will present the details of the program itself.
Call The Jeanne and Dan Team for all your HUD Homes questions or to place a bid on a HUD Home in WV or VA.
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