Monday, January 31, 2011

When to bid

HUD properties are offered on the market in phases depending on the condition of the property. There are three standards of condition. These conditions are based on FHA standards for a property to be inhabitable under a new FHA loan.

1. Insured - The property is in a good enough condition that FHA would insure a new loan on it as it sits.
2. Insured with Escrow - The property is not in a good enough condition where FHA can insure it as it sits, but with minor repairs (less than $5,000), it will be.
3. Uninsured - The property is not in a good enough condition where FHA can insure it as it sits, but with extensive repairs ($5,000-$35,000), it will be. Note: FHA typically will not insure a home at all with unpermitted conversions or repairs in excess of $35,000. On these properties you will notice posted "203K eligible - NO".

With that said, let me explain the bidding process. Prior to a property listing, an FHA approved appraiser visits the property and performs an FHA appraisal to determine the current value and condition of the property then categorizes it into one of the three condition states above.

Insured (I) and Insured with escrow (IE) properties are placed on the market in a thirty day EXCLUSIVE bid period. This bid period is exclusive to owner-occupant buyers or HUD approved non-profit organizations and government entities. During the first 10 days of this bid period, no bidder can win the property. After day 10, all bids are opened and reviewed. If there is no acceptable bid at that time, the property remains available to bid on a daily status (bids opened daily and reviewed) for 20 more days. Should the property not receive an acceptable bid during that time, then it moves to a bid period called EXTENDED. During the extended bid period, the property is on a daily status and is available to all bidders including investors.

Uninsured (UI) properties are handled a bit different. They come on the market in a Lottery phase for 7 days. During this lottery, the property is available for HUD approved non-profit organizations and government entities only. Occassionally, lottery properties will also be offered to "GOOD NEIGHBOR NEXT DOOR" (GNND) buyers as well. This ONLY occurs when the property is located in a revitalization area in an effort to place "good neighbors" (teachers and emergency response personel) in a struggling community. These buyers qualify for a 50% discount on HUD properties located in "revitalization areas". Once the 7 day lottery period ends, the property is then offered in an EXCLUSIVE bid period of just 5 days. All bids are considered after the fifth day. If there is not an acceptable bid at that point, the property moves to the EXTENDED bid period and is open to all bidders including investors on a daily status.

All owner-occupant and investor bidders must bid through a HUD-registered Realtor. If you are not already working with a Realtor, the West GA HUD Team would love to help. : )

Friday, January 28, 2011

Who pays the Realtor?

This question has been asked millions of times by first time home buyers. So let me just throw the answer out there for all to see and know. Realtors work for commissions and the commission is typically paid by the seller. The commission is a percentage of the sales price. If there is no sale, there is no pay.

The seller signs a listing agreement with a Realtor when they decide to sell their home. Part of this agreement is terms for paying the Realtor's commission at the closing of the sale. When a buyer offers on a property and they have their own Realtor representing them, the agents split the commission (usually 50/50). Each agent is responsible for representing their own client through the transaction in exchange for half of the pay.

The list agent's job is to list and market the property to buyers and other Realtors. Then negotiate on the sellers behalf to get as much money as possible for their property as quickly as possible with as little work as possible from the seller. They receive commission at closing for performing those duties.

The buyer agent's job is to narrow the selection and show properties to potential buyers, negotiate on the buyers behalf to get as much house for the money as possible as quickly as possible in the best condition as is possible for the buyer. When closing occurs, each agent is paid 50% of the agreed upon commission on the property from the seller's proceeds.

Specific to HUD properties, HUD pays up to 6% commissions. They offer 3% of the purchase price to the listing agent and 3% to the selling agent. Believe me when I say, both agents earn every penny of their commission in every transaction.

Thursday, January 27, 2011

Larry and I attended a great training class today that was hosted by Pemco and covered M&M III changes to the industry. We were fortunate enough to meet representatives from Ofori, Home Telos and HUD as well as see some familiar faces of our Pemco friends. What a great idea to host a panel of experts for a question and answer session! The class was most entertaining with Drew Prosperi from Pemco hosting the majority of the training session. The class really got me thinking about how the public in general has viewed HUD in the past, and that is what I want to blog on today.

HUD owned Real estate is NOT low income, or section 8 rental property. A HUD home is the result of a foreclosed FHA insured mortgage. Once these properties foreclose, the lender is able to file an insurance claim with FHA for their loss and receive payment in exchange for the property. Then HUD brings the property to a marketable condition and puts it up for sale through Realtors like ourselves. We get many calls a day from customers looking to rent or lease purchase HUD homes. HUD will not rent or lease the properties. They are offered strictly for sale.

Plenty! Besides getting a whole bunch of house for a little bit of money, other benefits include...

1. A HUD home is put on the market at the current appraised value. Dont miss the benefit of this small statement. HUD properties are appraised before they are listed. When you choose a HUD home, you know it is worth the asking price up front. FHA loans are required to use this appraisal for your loan. Unless you are doing conventional or 203K financing, you will not be required to purchase a new appraisal. That saves you money.

2. HUD properties offer special $100 down-payment financing through FHA. If you are obtaining an FHA loan on properties other than a HUD, FHA typically requires a minimum of 3.5% of the purchase price as a down payment. HUD properties are exempt from the 3.5% down-payment for a limited time to help move inventory off the market and clients into homes. The HUD property down-payment requirement on an FHA loan is as little as $100. You may elect to still put money down if you choose. Lenders may also choose not to participate in the $100 down payment program so ask your lender are they in or are they out!

3. HUD will pay 3% of the purchase price in closing costs for you. No need to haggle back and forth. They offer it up front. If you need it, use it!

4. HUD pays the attorney fee. Part of the process of purchasing a home is going to an attorney's office for closing. HUD has a contracted attorney office in place to close all HUD transactions. If you use this attorney, HUD pays their fee. You do have the option of using your own attorney if you choose but this will be at your expense. Something to keep in mind though - If you are obtaining financing, the attorney represents the Lender, not you, so you are just as well to allow HUD to pick up the tab and use the attorney they have in place.

5. Owner- Occupant preference. HUD properties are offered to purchasers intending to occupy the property as their primary residence first. The properties are offered for 30 days exclusively to owner-occupant buyers. Should the property remain available after the 30 day period, it will then become available to investors to bid.

6. Clear Title. HUD issues a clear title at closing. Any outstanding leins are satisfied and current year taxes are prorated. Every buyer is offered title insurance with post conveyance coverage which insures you that the property is yours fair and square. There are no stipulations where a previous owner can take the property back. Once purchased, you own that home.

Where do you find HUD properties?
HUD homes are in every neighborhood, every city, every state in the United States. You can search the nationwide site at or search local listings on our website by county or by map link at

Wednesday, January 26, 2011

The West GA Hud Team has recently joined RE/MAX United REO Benchmark and we are very excited about this change. This will allow us to be more involved in our community with our office instead of working remote from Atlanta as we were before. HUD as a whole has undergone transition over the past few months and lots of buyers and agents alike are in the dark about how to seek out and get HUD properties under contract with the new system. First off, in case you haven't heard, HUD has a new nationwide HUD listing website. This is a great idea. Regardless, if you are searching California or Florida, Texas or Maine...HUD's new one stop shop will hook you up. The site is All Realtors who wish to sell HUD owned property will have to register on this new site prior to bidding. As with all new sytems, the bugs are still being worked out so be patient. It's a masterpiece in the making. Under the new HUD system the state of Georgia has three different marketing companies, Pemco, Home Telos and Ofori. Each of these has multiple local listing brokers which is where we come into play. RE/MAX United is contracted with Pemco and Ofori to sell HUD homes in the west GA area. I am hoping to be diligent in posting to this blog as a useful tool for buyers and local agents. Wish me luck!