Holy HUD Headache
Recently I sold a Home to a Client in The Greater Oakland County Mi. That was a HUD Home and boy how things have changed just in the last few years. I knew going into this was going to be somewhat of a “Pain” and in doing these in the past few years it was not really a surprise, back not so long ago as a Realtor you usually had to deal with these and Short Sales to survive in the business. Thinking, as we do, getting our Bid excepted was a milestone in the business of dealing with HUD properties but this is as far from the truth now more than ever. It can seem like a very lonely process getting the things done that need to be completed so that you have covered the bases and have given your Home Buyer the best representation as possible and they deserve. To me one of the most important things when representing your Home Buyer in a HUD property is to let them know the facts up-front and to try as best you can to explain how the process works both negative and positive aspects of purchasing a HUD Home and the responsibility they share with you to assure that the process is followed so they are protected, and if it’s the first HUD Sale of a Realtor then they need to get answers if they are unsure. Not knowing or just guessing for your HUD Buyer can have a detrimental effect on them and could possibly lead to them losing their EMD (Earnest Money Deposit) and worse for them, losing the home they wanted. As with all Home Purchases the HUD Buyer has the right to hold or have a private inspection but this is only for their own information as HUD Homes are SOLD AS IS and if the HUD Buyer backs out they will lose their EMD or forfeit it. Try to make sure your HUD Buyer puts the minimal down that’s required by HUD, this information can be found in the HUD Packages supplied by the HUD Bank once the Bid has been accepted. Another heads up. Not all HUDS are the same. They can have different contracts and contingencies just like any other home. As always, be sure to read the contract first and make sure your HUD Buyer understands.
Additionally, on the HUDHomeStore Website linked here, it states that “HUD strongly urges every potential homebuyer to get a professional inspection prior to submitting an offer to purchase”, But some HUD Home Buyers want to move quickly as to not losing the property to another Bid. In my particular situation the HUD Buyer wanted to move on her Bid and get the Inspection after it was accepted. Be prepared to have not only the City Inspectors, Building Inspectors, Plumbing Inspectors and Electrical Inspectors visit the property before closing which can take a lot of your time and especially patience, but it is your duty to be there as the HUD Buyer is not allowed to be at the property during or at any time alone, this happening can cause your buyer to lose the deal, EMD and could cost you a fine! Be prepared for the work that a great agent must do, and don’t be surprised of the little if not no help from HUD or the Listing Broker, you will seem alone but always remember your goal is for your client and doing the best you can do for them. HUD Homes are a headache but also can be a reward to you and your HUD Buyer in the long run and you may find it worth it to put and go the extra mile or in this case miles.
Other Helpful Information
• Only primary residence buyers are allowed in the first round of bidding.
• If the home is being offered as eligible for FHA financing it:
– Has an existing FHA appraisal that must be used (unless expired) AND
– The sales price has usually been based on the existing appraised value. Bidding above the sales price may result in paying the difference out-of-pocket between the bid and appraised value.
• HUD does not automatically provide title insurance. This could be an additional expense, so inquire to avoid surprises at closing. Only if HUD has agreed to pay closing costs, could the insurance be provided at HUD’s expense.
• If HUD is offering a repair escrow, this amount can be added to an FHA loan, but HUD doesn’t pay for it.
• Lender documents must be to the title company up to 10 days prior to closing date in some states. Make sure that there is enough time to meet this requirement.
• HUD signs closing packages first. Then once the loan proceeds and the title company receives buyer down payment and closing costs, the buyer is allowed to sign.
• Closing delays are common due to “title clearing” issues. Foreclosed homes can have several liens due to utilities, taxes; etc that must be dealt with before closing can take place. Discuss potential challenges, such as rescheduling of moving trucks, and possible rate lock extension fees.