Buying a home w/ HUD guidelines?

Hello Allison ! You would have to confirm with the listing agent.... Usually that lingo means they are not accepting offers from investors or Non-Occupants yet..... They want owners who will be moving in the home. HUD Homes are a completely different animal and assigning these are rare.

DG

Tarzan (D) is that you? I thought I recognized the dog pic. How the heck are ya? I'm still in the trenches, but getting closer. A lot has happened....Blah, blah, blah. I know, I know. But life is better on the home front, finally, and I'm going to do this now. I don't give up!

Hope you're doing well.

Hi, Allison!
The listings you're referring to are likely RECMs (Institution-owned)...
Here's a link posted 12/20/12: http://www.deangraziosi.com/comment/reply/132000/239182?quote=1#comment-...

quote=Liberty Kat]
Some of these homes will be found on the MLS...Being sold "as-is."
"This property is being sold subject to 24 CFR 206.125."

In many cases these were probably RECMs taken out during the boom by someone over 62 and in many cases, not all, they are in better condition than most other REOs because they were transferred back to the lender due the death of the owner rather than as a result of a financial or fraudulent situation. They're becoming available due to the drop in the value of homes since the peak of the market when some Ginnie Mae lenders were aggressively marketing reverse conversion mortgages. The expectation at that time was that values would continue to increase. These REOs typically don't have any owner occupant or NSP buyer restrictions when they come on the market. Some of these properties are very good values and usually end up having multiple offers on them.

Similar to Homepaths and HUDs, they generally will not sell the property for less than the asking price which is usually an [as-is] appraised value established by an FHA roster appraiser. They are sold "as-is" at the time of closing with no repair reimbursements or allowances. They won't pay for home warranties either. Home inspections and the connections of utilities for inspections will be at the buyer's expense. Also the seller will not contribute to buyer's closing costs. [/quote]

Title 24: Housing and Urban Development

Subtitle B: Regulations Relating to Housing and Urban Development (Continued)

CHAPTER II: OFFICE OF ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

SUBCHAPTER B: MORTGAGE AND LOAN INSURANCE PROGRAMS UNDER NATIONAL HOUSING ACT AND OTHER AUTHORITIES

PART 206: HOME EQUITY CONVERSION MORTGAGE INSURANCE

Subpart C: Contract Rights and Obligations

: Claim Procedure

206.125 - Acquisition and sale of the property.

(a) Initial action by the mortgagee. (1) The mortgagee shall notify the Secretary whenever the mortgage is due and payable under the conditions stated in ? 206.27(c)(1), or one of the conditions stated in ? 206.27(c)(2) has occurred.

(2) After notifying the Secretary, and receiving approval of the Secretary when needed, the mortgagee shall notify the mortgagor that the mortgage is due and payable, unless the mortgage is due and payable by reason of the mortgagor's death. The mortgagee shall require the mortgagor to (i) pay the mortgage balance, including any accrued interest and MIP, in full; (ii) sell the property for at least 95% of the appraised value as determined under ? 206.125(b), with the net proceeds of the sale to be applied towards the mortgage balance; or (iii) provide the mortgagee with a deed in lieu of foreclosure. The mortgagor shall have 30 days in which to comply with the preceding sentence, or correct the matter which resulted in the mortgage coming due and payable, before a foreclosure proceeding is begun.

(3) Even after a foreclosure proceeding is begun, the mortgagee shall permit the mortgagor to correct the condition which resulted in the mortgage coming due and payable and to reinstate the mortgage, and the mortgage insurance shall continue in effect. The mortgagee may require the mortgagor to pay any costs that the mortgagee incurred to reinstate the mortgagor, including forclosure costs and reasonable attorney's fees. Such costs shall be paid by adding them to the mortgage balance. The mortgagee may refuse reinstatement by the mortgagor if:

(i) The mortgagee has accepted reinstatement of the mortgage within the past two years immediately preceeding the current notification to the mortgagor that the mortgage is due and payable;

(ii) Reinstatement will preclude foreclosure if the mortgage becomes due and payable at a later date; or

(iii) Reinstatement will adversely affect the priority of the mortgage lien.

(b) Appraisal. The mortgagee shall obtain an appraisal of the property no later than 30 days after the mortgagor is notified that the mortgage is due and payable, or no later than 30 days after the mortgagee becomes aware of the mortgagor's death, or upon the mortgagor's request in connection with a pending sale. The property shall be appraised no later than 15 days before a foreclosure sale. The appraisal shall be at the mortgagor's expense unless the mortgage is due and payable. If the mortgage is due and payable, the appraisal shall be at the mortgagee's expense but the mortgagee shall have a right to be reimbursed out of the proceeds of any sale by the mortgagor.

(c) Sale by mortgagor. Whether or not the mortgage is due and payable, the mortgagor may sell the property for at least the lesser of the mortgage balance or the appraised value (determined under ? 206.125(b)). If the mortgage is due and payable at the time the contract for sale is executed, the mortgagor may sell the property for at least the lesser of the mortgage balance or five percent under the appraised value. The mortgagee shall satisfy the mortgage of record (and the Secretary will satisfy the second mortgage required under ? 206.27(e) of record) in order to facilitate the sale, provided that there are no junior liens (except the mortgage to secure payments by the Secretary under ? 206.27(e)) and all the net proceeds from the sale are paid to the mortgagee.

(d) Initiation of foreclosure. (1) The mortgagee shall commence foreclosure of the mortgage within six months of giving notice to the mortgagor that the mortgage is due and payable, or six months from the date of the mortgagor's death if applicable, or within such additional time as may be approved by the Secretary.

(2) If the laws of the State in which the mortgaged property is located or if Federal bankruptcy law does not permit the commencement of the foreclosure within six months from the date of the notice to the mortgagor that the mortgage is due and payable, the mortgagee shall commence foreclosure within six months after the expiration of the time during which such foreclosure is prohibited by such laws.

(3) The mortgagee must give written notice to the Secretary within 30 days after the initiation of foreclosure proceedings, and must exercise reasonable diligence in prosecuting the foreclosure proceedings to completion and in acquiring title to and possession of the property. A time frame that is determined by the Secretary to constitute ?reasonable diligence? for each State is made available to mortgagees.

(4) The mortgagee shall bid at the foreclosure sale an amount equal to the appraised value of the property.

(e) Other bidders at foreclosure sale. If a party other than the mortgagee is the successful bidder at the foreclosure sale, the net proceeds of sale shall be applied to the mortgage balance.

(f) Deed in lieu of foreclosure. (1) In order to avoid delays and additional expense as a result of instituting and completing a foreclosure action, the mortgagee shall accept a deed in lieu of foreclosure from the mortgagor if the mortgagee is able to obtain good and marketable title from the mortgagor.

(2) In exchange for the executed and delivered deed, the mortgagee shall cancel the credit instrument and deliver it to the mortgagor and satisfy the mortgage of record.

(g) Sale of the acquired property. (1) Upon acquisition of the property by foreclosure or deed in lieu of foreclosure, the mortgagee shall take possession of, preserve and repair the property and shall make diligent efforts to sell the property within six months from the date the mortgagee acquired the property. Repairs shall not exceed those required by local law and, in cases where the sale is made with a mortgage insured by the Secretary or guaranteed by the Secretary of Veterans Affairs, those necessary to meet the objectives of the property standards required for mortgages insured by the Secretary. No other repairs shall be made without the specific advance approval of the Secretary. The mortgagee shall sell the property for an amount not less than the appraised value (as provided under paragraph (b) of this section) unless written permission is obtained from the Secretary authorizing a sale at a lower price.

(2) Repairs shall not exceed those required by local law or the requirements of the Secretary of HUD or the Secretary of Veterans Affairs if the sale of the property is financed with a mortgage insured by the Secretary of HUD or guaranteed, insured or taken by the Secretary of Veterans Affairs.

(3) The mortgagee shall not enter into a contract for the preservation, repair or sale of the property with any officer, employee, owner of ten percent or more interest in the mortgagee or with any other person or organization having an identity of interest with the mortgagee or with any relative of such officer, employee, owner or person.

(Approved by the Office of Management and Budget under control number 2528-0133)

[54 FR 24833, June 9, 1989; 54 FR 32060, Aug. 4, 1989, as amended at 60 FR 42761, Aug. 16, 1995; 61 FR 49034, Sept. 17, 1996]

Effective April 19, 2002, the required deposit will be $500.00 when the purchase price is $50,000.00 and under and $1,000.00 when the purchase price is over $50,000.00.
Return of Earnest Money
The following provisions are applicable in all instances except those where HUD is unable or unwilling to close the sale, in which case the entire amount will be returned.

Investor Purchasers:
Uninsured Sales:
100% of the deposit will be forfeited to HUD for failure to close, regardless of the reason.

Insured Sales:
• 50% of the deposit will be forfeited to HUD for failure to close if the purchaser is determined by HUD to be an unacceptable buyer.
• 100% of the deposit will be forfeited to HUD if the sale fails to close for any other reason.

BUY FSBOs!!! LOL

Don't give up looking for other homes.

HUD homes can be great deals.... don't let all that mambo jambo intimidate you; ...but you cannot wholesale them. You can buy to hold, or buy, fix, and flip after 90 days of closing. Also, you can make offers lower than the asking price, and if they don't have any other offers, they will counter or accept.
You cannot make offers as an investor the first couple of weeks when the property is first put on the market (you will know because on their listing website the property will have the word 'exclusive' next to the listing, and once it's available to investors it will have the word 'extended')

wishing you success,

Thanks all so much for the info! I would love to fix & flip this house, but have never done that before and don't know if I'd be taking on too much. I haveto think about that and do some research.

We wholesale HUDs all the time! Did 2 in December. You just have to know how to do it. Totally legal and ethical. In my opinion, HUDs are not a good entry level, no money down strategy. You have to really have your ducks in a row to wholesale HUDs or you can easily loose your earnest.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

as you say... you have to know how to do it; I know that you can do just about anything, but for someone starting without any money, I don't see how they could pull it...
... and yes, you can loose your EM very easily! Once you put a name/business on the purchase offer, you cannot change it (nor can you write in "and/or assigns"), so in order to 'wholesale them', you would need to make the offer with your buyer's name and get paid your fee separately, or purchase them as an LLC with your funds, and then sell them with the LLC...
How do you wholesale them Mike?

I've bought a couple, but I fixed and am holding them...

Allison, if you want to buy a HUD to fix and flip, you need to have a good contractor on your team, and a partner who can put up the money. Once you get the property rehabbed, you can get a tenant in it, and then sell to a buyer as a turnkey. You pay back your partner, you get your share, and you move on to your next deal

Like you said Val, not really where entry level, 1st deal people should be involved. They would need STRONG buyers that WANT the deal and can ACTUALLY close. If they have that in place they can do it. MOST don't until they go out and try to do deals. So learning on a HUD is not a good idea.

I do a single closing with NONE of my money up front and no fee collected until closing. I certainly don't buy the place first!

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Michael, how do you handle activating the utilities on a HUD home?

i think I'm just going to act as a property locator on this one and pass the info on to one of my buyers....$500 is better than nothing.

Good idea, you have to always have a way out, right? Way to go, and keep at it.

I don't. If the power is off, I don't turn it on. My buyers know what they are looking at. Never had a request to have the power turned on.

Happy New Year!
Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Michael, are you submitting your offers via the electronic bidding system?

I don't know what my agent does. I submit through him only.

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC