U.S. Department of Housing and Urban Development:
The primary housing and lending regulatory authority in the United States for FHA Loans is known as “HUD,” the U.S. Department of Housing and Urban Development. Among many other things, HUD is responsible for the operations of the Federal Housing Administration (FHA), which is the agency that insures mortgage lenders against loss on FHA home loans. When FHA borrowers default on their home loan, the property goes through a foreclosure process. After the final judgment has been given in favor of the lender who initiated foreclosure a claim against the FHA Insurance Fund is filed and the property is then conveyed into the name of the U. S. Department of Housing and Urban Development. HUD wants to sell the property as quickly as possible and recover as much of the claim amount as it can to replenish the FHA insurance fund. Since 1999, HUD has solicited and awarded Management and Marketing (M&M) Contractors to maintain and sell the HUD owned single-family residential properties (1 to 4 units). These M&M Contractors, following HUD guidelines, are responsible for all aspects of property care and resale on behalf of HUD. Hooks Van Holm is the M&M Contractor for the States of Pennsylvania, Delaware, Alabama and Mississippi. HVH is responsible for making decisions regarding the properties that serve HUD’s best interest and create the best possible opportunity for real estate agents and brokers to represent their clients, increase home ownership and enhancement of neighborhoods.
Eligible to Buy HUD Homes:
The Federal Government has charged HUD with enforcing the national Fair Housing laws in all real estate transactions. If your clients are financially qualified buyers, they can purchase a HUD owned home, regardless of their race, color, religion, sex, national origin, handicap, or familial status. Before making an offer on behalf of your clients, you must make certain that they have been pre-qualified by a mortgage lender for the loan amount that will be needed. A dated letter on a lender’s letterhead must state the name(s) of the buyers, the amount of loan for which they qualify, the fact that a Credit Report was reviewed and approved by the lender, and the time period that the buyers have to make a purchase under the terms of that letter. Purchasers who are able to pay all cash must provide verifiable proof that they have the funds available at the time of the offer.
Commission:
HUD pays up to a 5% sales commission to currently licensed HUD registered real estate brokers at the time of transaction settlement and closing. These registered brokers, as well as all the agents who are licensed under them, are encouraged to show, advertise, and submit competitive offers on HUD owned properties. The selling broker does not split this commission with the local listing broker, who is paid separately by agreement with HVH.
Broker Registration:
Registration is simple and there is no cost, but it does take some time, so if you are just starting this process, please allow at least four (4 to 6) weeks. It is your responsibility to get this step done before working with the prospective buyer of a HUD home, and you must make certain your registration stays current. The principal broker for your real estate company, or for each branch office of a multi-office firm, must complete a registration package that includes the HUD forms known as the SAMS 1111 and 1111A. Please note that all the agents and broker-associates who are licensed under the principal broker are included in this registration; they do not register separately.
Certain restrictions apply to HUD employees and to anyone associated with the M&M Contractors or any of their subcontractors.
When your broker’s registration package has been fully processed, the result is the assignment of a HUD-issued Name Address Identifier (NAID) number that must be renewed annually. You will use your broker’s EIN or Social Security number each time you bid, that is, when you place an electronic offer to purchase a HUD owned property on the M&M Contractor’s web site.
To obtain a HUD NAID number, please follow the instructions on the forms and the following steps:
1. Download, print, and READ the SAMS 1111 and 1111A forms.
2. If this is your first time to register with HUD, fill in the form completely, leaving the space blank where it asks for your NAID number.
3. The broker for your firm or branch office must sign both the SAMS 1111 and 1111A forms, and will then be the only authorized signatory for HUD-9548 Sales Contracts, indicating that the broker accepts responsibility to ensure that the selling broker’s agents have complied with all the HUD requirements. Signatures must always be originals signed with a blue ink pen.
4. Submit copies of the required documents that show proof of business address, tax ID number, and current broker’s license from the state.
Deliver the package to the M&M Contractor’s main office for your area. Keep a tracking receipt for your records. The addresses are provided on www.HooksVanHolm.com
It is required that real estate Brokers have a current NAID number before submitting an offer on a HUD home. This registration expires when the broker’s real estate license expires, or must be renewed annually, whichever is sooner. It must also be updated whenever there is any change to the information. Timely updates and renewals will retain the same NAID number. Deactivation of the NAID number occurs if renewal is not done timely and access to the bidding screen to place an offer will be denied. In this case, a new NAID number must be applied for. Please avoid interruptions to your HUD business by renewing properly. Contact the Hooks Van Holm office in your area for assistance with this process.
HUD Listing:
Listings describing HUD homes that are ready and available for sale are posted on line at the web sites maintained by each of the M&M Contractors for the states where they are responsible for maintaining and selling the properties. For Pennsylvania, Delaware, Mississippi and Alabama, the web site is www.HooksVanHolm.com additionally, in each local area, the Multiple Listing Services (MLS) also carry the listings. Please rely on the M&M Contractors’ web sites for the actual and official information about the status of each property in their area. MLS information may not be as current.
All offers to purchase must be submitted electronically on the M&M Contractors’ bidding service that is available through their web site. Listings and bidding guidelines vary by area according to the marketing plans approved by HUD for the different M&M Contractors.
Yes, HUD owned homes usually qualify for specific FHA financing options, according to the listing type described below. If the house is in acceptable condition, an FHA 203(b) loan or a 203(b) with Repair Escrow may provide the best financing. If the repairs are predetermined to exceed $5000, or the buyer desires to renovate it, an FHA 203(k) loan may be used except investor purchasers. The FHA appraisal ordered and paid for by the M&M Contractor sets the “as-is” value for the property, which is valid for six (6) months. FHA borrowers may not overbid the appraised value unless they are able and willing to add the difference above the appraised value in cash to the 3% FHA down payment amount needed at closing. Any HUD property may also be purchased for all cash, or with conventional or other financing, subject to the lender’s requirements for that type of loan. Different options for FHA and non-FHA financing should be discussed with local mortgage lenders at the time the prospective HUD home purchaser obtains the required pre-qualification letter. The web site www.hud.gov lists FHA lenders and www.hudclips.org provides access to the HUD Mortgagee Letters that instruct FHA lenders about the financing rules for FHA loans on HUD owned homes.
What does the listing type mean:
There are three (3) listing types, as described below, that indicate the best FHA financing for the property, based on its overall condition and other relevant factors. Each listing on our web site will include the listing type, picture(s) of the property, and the FHA appraised value. The Sales Contract is available to download and print from our web site www.hookvanholm.com under the FORMS Tab, and there is a Property Condition Report (PCR) that discloses any known information about the property.
1. ”IN” or Insurable Listings
These properties are in sufficiently good condition to qualify as collateral for an FHA 203(b) loan. This is the most common and simplest type of FHA loan.
2. “IE” or Insurable with Repair Escrow Listings
A repair escrow is established using extra funds borrowed by the purchaser from the FHA lender to enable these properties to be eligible for an FHA 203(b) loan. The house will have up to $5,000 worth of repairs to be made within ninety (90) days or less after closing to meet “Minimum Property Standards” (MPS). The total escrow may not exceed $5,500 including the contingency. After closing, the purchaser then must use the money in the escrow account that the lender has added to the loan amount to have the specific MPS repairs made that are required to bring the property up to meet MPS requirement condition to qualify as the collateral for the loan. The amount of the escrow is based on the appraisers estimate of costs to repair, and is reflected in the property listing on the web site along with the items requiring repairs. Any funds in the escrow account that are left over after the lender has made an inspection to be sure the repairs are complete may reduce the principal balance of the loan, or with lender approval, may be used to make additional improvements to the house. Note: The money for the repair escrow is NOT money provided by HUD it is money the purchaser borrows from their FHA lender. If a buyer for an IE listing does not use FHA financing, there is no repair escrow.
3. “UI” or Uninsurable Listings
If a property cannot be brought up to FHA requirements with the $5,000 worth of repairs, or if the purchaser wishes to make more extensive renovations, FHA 203(k) financing is often appropriate. In these cases, the FHA-approved appraiser’s value is the “as is” amount and the purchaser gets estimates from contractors for the renovations or as directed by the lender’s 203k workup. The lender then gets an “as repaired” appraisal based upon the cost estimates supplied by the purchaser’s contractors or the FHA Consultant. If the house will be worth the total of the “as is” value and the costs to rehabilitate or renovate, then the FHA 203(k) lender can make one loan that will include both the acquisition and the rehabilitation money, assuming the buyer/borrower qualifies to repay that amount of a loan. Knowing a good FHA lender with 203(k) experience is essential for this type of sale to work.
Deadlines for Bids and Contracts:
As the Management and Marketing Contractor for the States of Pennsylvania, Delaware, Alabama and Mississippi, Hooks Van Holm has simplified the deadlines and timeframes for listing, bidding, and delivering Contract Packages on HUD properties.
PROPERTIES WILL BE LISTED ON FRIDAY OF EACH WEEK.
All new, reduced, return to market, non-profit, OND/TND and $1 homes are listed on Fridays. Each listing will indicate what type of purchaser is eligible to place bids on that property:
The non-profit and OND/TND listings are available for 5 days then unsold properties roll over to the regular list where they are listed with an owner occupied hold for the first ten days. The $1 home listings are available for 10 days only to local governments and if not sold roll over to the daily list. Once a property has been offered to the local government for $1 they may still purchase the property for $1 after it rolls back to the daily listing.
ONLY OWNER OCCUPANTS MAY PURCHASE NEW LISTINGS FOR THE FIRST TEN DAYS (10) AS FOLLOWS:
• From the Friday that a newly listed property comes on the market until 11:59 p.m. on the tenth (10nth) day, the property will be open for bids to owner occupants only.
• On the next business day, the HIGHEST ACCEPTABLE NET bidder who is an Owner Occupant will be offered the opportunity to buy the property.
• The next highest acceptable net offer from an Owner Occupant will be placed in back-up position.
• At this time it is the broker’s responsibility to review the bid results page to ascertain if their bid was the winning bidder.
DAILY BIDDING AFTER THE FIRST TEN DAYS ALLOWS ALL BIDDERS TO PARTICIPATE EQUALLY
• After the first ten (10) days, all purchasers may bid and offers will be evaluated on each business day.
• At this point, the highest acceptable net to HUD is given the opportunity to deliver a Sales Contract to HVH within 48 hours from the bid being awarded, regardless of whether the offer is from an Owner Occupant or an Investor.
• The next highest acceptable offer (whether Owner Occupant or Investor) will be placed in back-up position.
Definitions of purchaser types: Direct & Discounted purchasers are HUD-approved Non-Profit Organizations or qualified OND/TND individuals, as discussed above. Owner Occupants are purchasers who will live in the house as their primary residence for at least one year and they may not purchase another HUD home for two years. Investors are not required to live in the home and may resell it or rent it as they choose.
COMPLETING THE PAPERWORK FOR THE PURCHASE TRANSACTION
At present brokers have 48 hours to submit a complete Contract Package to the HVH office located in the contract area where the property is located. In the future we are proposing that E-mail notifications to highest net acceptable bidder and back-up bidder will be sent during the morning of the next business day after the bidding period closes. This will occur daily if the property has been for sale longer than the initial ten (10) days. Each e-mail message will indicate the next steps and requirements for the bidder’s agent to follow. The complete Contract Package must be delivered within 2 Business Days to the HVH office located in the contract area where the property is located, as provided on our web site.
NOTICE: Until Contract Packages are received, reviewed, and ratified, there is no “Contract Pending” and the property is not “Sold.” HUD reserves the right to withdraw any property from the market at any time before the Sales Contract is ratified, or to reject, cancel, or void the bid offered by any person for any reason in HUD’s sole discretion. Any late or incomplete Contract Package may be rejected and the back-up bidder given the opportunity to produce an accurate and complete Contract Package, or the property may be placed back on the web site for other bidders to make offers. HVH is required to follow HUD directives regarding availability and sales of all HUD owned properties, and will always act accordingly in HUD’s best interest.
Other HUD Sales Requirements:
Yes, there are important requirements that agents and brokers should be aware of and should inform their prospective HUD home buying clients about. HVH will frequently offer training sessions to real estate licensees to fully explain all the HUD homes sales regulations and to answer all your other questions. Please check the Broker Information section of our web site, www.hooksvanholm.com, for an updated schedule of our training seminars.
ALL HUD HOMES ARE SOLD “AS-IS”
As the seller, HUD has a policy NOT to make any repairs, except when there are health and safety issues that must be corrected, or when further damage or loss to the property is likely to occur if a repair is not made. All such repairs must be completed before the house is placed on the market for sale. Therefore, when the property is listed, “what you see is what you get.” The property is offered for sale strictly “AS IS.” There are no representations or warranties, expressed or implied, on the houses. Whether listed FHA insurable or not, HUD does not guarantee the condition of any house, nor whether it meets local codes or zoning requirements.
Advise your clients to make certain that the property’s “as is” condition is acceptable to them before they execute the contract and authorize you to make an offer to purchase on their behalf.
It is required that you have your clients carefully read paragraph B and all the other terms of sale described in the HUD-9548 Conditions of Sale. They must understand and agree to all the Sales Contract and addenda terms, and all documents must be signed by the purchasers before you make an offer electronically in their names.
The Purchaser has fifteen (15) days after the ratification date on the Sales Contract to have all their inspections made. The required HUD-92564-CN addendum “For Your Protection: Get a Home Inspection” must have been signed at the same time as the Sales Contract. It describes the fact that the purchasers must rely upon their own independent inspectors to know what the condition of the property is. Utilities may be turned on after submitting request and receiving permission from the appropriate HVH regional Property Management Office for the inspections. All costs are at the purchasers’ expense. It is important that all brokers are aware of the guidelines set forth regarding performing Home Inspections and to notify your purchasers of the guidelines as well. Any damages incurred as a result of negligence at the time the utilities are turned on is at the broker and/or purchasers expense. (For instance, the water is turned on and no one is present at the property which results in a flooding situation.) The cost to bring the property up to its original condition is a cost that you and/or your purchasers must bare. It is also required that once an inspection is completed that the prospective Property Management Office be notified to assure you have left the property in its original condition. In the event that damage has occurred and If you choose to hire your own contractor, the HVH office must be aware so that they can retrieve the appropriate disclaimers from the contractor and assure proper compliance with HUD guidelines before any work can be done.
OBTAINING A PRE-QUALIFICATION LETTER FOR THE PURCHASER
Brokers are responsible to see that prospective buyers have been pre-qualified for a loan by a lender who has issued a letter on the lender’s letterhead to the purchaser. Letters from mortgage brokers who do not actually lend funds are not acceptable. The pre-qualification letter must be included in the Contract Package, or your bid may be cancelled and the back-up bidder’s Contract Package accepted. For purposes of this program, “pre-qualification” means a loan application has been made, and a preliminary loan commitment has been obtained from a recognized mortgage lender who states that a preliminary Credit Report has been performed, reviewed, and approved. Furthermore, the letter must state that on the basis of this review, the mortgage financing for a specified dollar amount sufficient to purchase the property should be available to this Purchaser. Letters must be current, that is, dated and signed within 60 days or less prior to the bid date.
OFFERS ON MORE THAN ONE PROPERTY SIMULTANEOUSLY
As an Owner Occupant, your client is only allowed to purchase one property, and therefore only needs to provide you with one earnest money deposit check. If the Owner Occupant offers the highest net acceptable bid on two or more properties, HVH will select which property he or she will be given the opportunity to purchase. They will NOT be allowed to choose.
If you are working with an Investor, he or she is allowed to buy two or more properties at a time, and therefore must supply you with a separate earnest money deposit for each bid. If the Investor offers the highest net acceptable bid on two or more properties, HVH will expect him or her to purchase all of them, or forfeit the earnest money deposits on the ones not purchased.
OFFERS REFLECTING DIFFERENT PRICES FOR ONE PROPERTY FROM THE SAME PURCHASER
Do not make two offers from one purchaser on the same property! If your clients change their minds about the price they wish to offer, you must first cancel the prior bid before the bid deadline is past. After bidding closes, your highest offer will be the only one considered, and if your intention is unclear, all your bids on that property may be rejected.
CONTRACT CANCELLATION
If your clients are unable to close a transaction after the Sales Contract has been ratified, please notify the Closing Manager at HVH immediately in writing either by e-mail or by fax, but not later than ten (10) days after the contract cancellation date or preferably as soon as you are aware of the cancellation. If a refund of the earnest money deposit is requested in writing with supporting documentation that describes the reason, HVH will evaluate the request according to HUD guidelines and notify the agent or broker whether the request will be approved or denied. In no case will a refund be approved if the request is made to the Closing Agent rather than to HVH, or if there is no written documentation for the reason.
HUD RULES FOR REFUND OR FORFEITURE OF THE EARNEST MONEY DEPOSIT
The agent or broker must have certified funds on deposit from the prospective purchasers prior to bidding on their behalf. These deposits must be held in a non-interest bearing account. In addition, the broker is responsible for the escrow funds of the purchaser per the 1111-A executed by the broker. Should the laws in your area not require that the broker hold escrow accounts, the HUD closing agent may hold the escrow funds should they agree to do so. Here are the amounts required:
• $500 from an Owner Occupant if the offered sales price will be $50,000 or less,
• $1,000 from an Owner Occupant if the offered sales price will be $50,001 or above
• One-half the offered sales price of the property if it is a vacant lot.
Taken directly from HUD documentation regarding its property disposition rules, the following will be applied to determine whether there will be a refund or forfeiture of the earnest money deposit after there has been a contract cancellation:
A. Investor Purchasers
1) Uninsurable (UI) Sales—The Purchaser forfeits 100% of the deposit for failure to close, regardless of reason.
2) Insurable (IN) Sales—The Purchaser forfeits 50% of the deposit for failure to close if the Purchaser is determined by HUD (or a Direct Endorsement Underwriter) to be an unacceptable buyer. The Purchaser forfeits 100% if the sale fails to close for any other reason.
3) Vacant Lots—The Purchaser forfeits 100% of the deposit.
B. Owner-Occupant Purchasers
1) The entire deposit will be returned, if requested in writing within 15 days, with adequate documentation included, when:
• There has been a death in the immediate family (Purchaser, spouse, or a child that resided in the same household);
• There has been a recent serious illness in the immediate family that has resulted in significant medical expenses or substantial income loss, adversely affecting the Purchaser’s financial ability to close the sale;
• There has been a loss of job by one of the primary breadwinners, or substantial loss of income through no fault of the Purchaser;
• On an IN sale, HUD (or Direct Endorsement underwriter) determines that the Purchaser, in spite of having a pre-qualification letter, is not an acceptable borrower, or
• On an UI sale, the purchaser was pre-approved for mortgage financing in an appropriate amount by a recognized mortgage lender and, despite good faith efforts, is unable to obtain mortgage financing. "Pre-approved" means a commitment has been obtained from a recognized mortgage lender for mortgage financing in a specified dollar amount sufficient to purchase the property, or
• There is other equally good cause, as determined by the M&M Contractor, in keeping with the spirit and intent of the above policy.
2) On an UI sale, the Purchaser forfeits 50% of the deposit in those instances where, despite good faith efforts by the Purchaser, there is an inability to obtain a mortgage loan from a recognized mortgage lender.
3) On either an IN or UI sale, the Purchaser forfeits 100% of the deposit in those instances where no documentation is submitted, where the documentation fails to provide an acceptable cause for the Purchaser’s failure to close, or where documentation is not provided within a reasonable time following contract cancellation.
CONTRACT EXTENSIONS
Once executed, contracts are valid for 45 days from the date of execution by HVH, with the exception of 203k loans, which are 60 days. It is the responsibility of the broker to apply for the extension before the 45 days has expired. Automatic cancellation will occur on the closing date that is written on the Sales Contract, unless an approved extension has been granted. HVH will grant contract extensions on a case-by-case basis if the facts indicate that there is a necessary delay to settlement and closing. Requests must be made through HUD’s closing agent and ALL extension fees must be paid at the time of the request. The HUD closing agent is responsible for submitting the extension request to the local HVH office within three (3) business days prior to the closing date set on the Sales Contract.
No request will be approved unless the appropriate fee in the form of certified funds accompanies the request. The non-refundable fee, made payable to the U.S. Department of HUD, is $10.00 per day for Contract Sales Price of $25,000. Or less, $15 per day for Contract Sales Price of $25,001 to $50,000 and $25 per day for Contract Sales Price over $50,000. If closing occurs in less than fifteen (15) days, the purchaser will be credited a prorated amount equal to the daily extension fees as designated by HUD per day. There is a required addendum that the purchasers must sign to be included in the Contract Package that restates HUD’s policy regarding extending the closing date. Should an extension fee be waived, the appropriate fees will be credited at closing on the HUD 1 Settlement Statement.
HVH and its local listing agents are instructed to remove (and may discard) any unauthorized signs.
KEYS TO HUD HOMES
A HUD master key is available to agents and brokers who are registered to show and sell HUD homes at the offices of HVH and its local listing agents. A log of who has keys will be kept, in which case, you may be asked to provide your license number, NAID number, and contact information for record keeping purposes. At the time of transaction settlement and closing, the selling broker must inform the new homeowner that the locks must be changed. Prior to closing the selling agent or broker is prohibited to give them the master key! Doing so may cause the deactivation of your NAID number and your opportunity to sell HUD homes in the future.
PREVENTING VANDALISM
All real estate professionals working with HUD in any capacity are requested to assist us to preserve and protect these properties until they are sold and transferred to the care of the new owners. If vandalism occurs and you are aware of it, please notify HVH immediately. The facts of each situation are reviewed on a case-by-case basis to determine what corrective actions will take place. If you have a contract pending on a vandalized property, closing may be delayed or cancelled.
ACCESS TO THE PROPERTY PRIOR TO CLOSING
As the selling agent or broker, please impress on your clients the fact that these properties are government owned and MUST NOT be entered without authorization for any reason whatsoever. You are required to be with your clients at all times. This includes when you are showing the properties or during your clients home inspection. As an approved selling agent or broker, you are required to re-secure all entrances to the house and assure the property has been left in its original condition. It is NEVER permissible for purchasers to make repairs, occupy, or move any personal items onto the property prior to settlement, closing, and transfer of the title of ownership into their names.
Note that any violation of this prohibition constitutes a breach of the HUD-9548 Sales Contract, with penalties resulting that may include charges of trespassing in addition to the cancellation of the sale, forfeiture of the earnest money deposit, and removal of personal property found on the premises that may be damaged or destroyed in the process. HUD registered brokers are also subject to possible disciplinary action by HUD that may include debarment from working with HUD in the future. Please take these warnings seriously, monitor the actions of your clients prior to closing, and notify HVH if you know of any violation.
Sales Contract:
Originally the HUD-9548 Sales Contract dated 1/99 was only available from the Government Printing Office in a multi-part carbon set form. This form has been replaced for the most part by the HUD-9548 (1/99) that may be downloaded and printed from the web sites of M&M Contractors, along with the applicable addenda. HUD is in the process of revising the sales contract 9548. If HUD revises the required Sales Contract, you will be informed through the web site and training seminars provided by HVH and other companies for the areas they serve. You are responsible for keeping up to date on changes made by HUD, so please check our web site at www.hooksvanholm.com frequently.
PLEASE PREPARE AND HAVE THE BUYERS SIGN THE HUD-9548 (1/99) SALES CONTRACT COMPLETELY AND EXACTLY AS FOLLOWS BEFORE PLACING AN ELECTRONIC OFFER TO PURCHASE (THAT IS, BEFORE BIDDING) NOTE: THE INFORMATION SUBMITTED ON THE BID MUST MATCH EXACTLY ON THE CONTRACT, I.E., SOCIAL SECURITY NUMBERS MUST MATCH EXACTLY WITH THE BID SUBMISSION. ERRORS OR TRANSPOSED NUMBERS WILL BE REJECTED. WE URGE YOU TO CAREFULLY REVIEW YOUR BID INFORMATION TO ASSURE ACCURACY BEFORE SUBMITTING.
Item #1 Purchaser(s) Names and Property Address
Give the full legal name(s) of your prospective buyer(s) and the complete HUD property address, including city, state, county, and zip code. The HUD case number goes in the box in the upper right corner of the page. Because no HUD contract is assignable, settlement and closing must occur with at least one of the original buyers who signed the Sales Contract. The client on whose behalf you place the electronic bid, whose name and Social Security Number was entered on the bidding screen, must be the same person who initialed and signed the Sales Contract and addenda before you bid. The same person must take title at the time of settlement and closing.
Item #2 Legal Vesting of Title
Write the legal style or type of ownership in which title will vest to your clients. The HUD Closing Agent is charged with preparing the deed to transfer title according to this information, so be sure this reflects how the buyer(s) wish to take title.
Item #3 Purchase Price and Earnest Money Deposit
Insert the amount your client(s) have authorized you to bid on their behalf on the blank line on the right. Any price may be offered for a HUD home, but property has a preset, unpublished minimum acceptable price below which the seller (HUD) will not sell at that time. Of course, full price is always acceptable, assuming the buyer meets other qualifications, but your buyers (with your advice based on your market knowledge) are free to offer whatever price the property is worth in their determination. The FHA appraised value or “as is” price of the property is provided on the listing screen.
Indicate the correct earnest money deposit for Owner Occupant purchasers, which is $500 (for an offer of $50,000 or less) or $1,000 (for an offer of $50,001 and above, or one-half the sales price of a vacant lot. There is no earnest money required from qualified OND/TND and NPO Purchasers. It is strictly required by HUD that BEFORE you place a bid on behalf of your clients, you must have possession of the earnest money deposit in form of CERTIFIED CHECK, CASHIERS CHECK or MONEY ORDER. Do not accept personal checks!
The earnest money deposit check or money order must be made payable to your Broker’s Escrow Account or HUD’s Designated Closing Agent whichever is customary in your area. Use your company’s or broker’s name as the payee. For example, “ABC Real Estate, Inc., Escrow Account” or “Broker Jane Smith’s Escrow Account.”
Complete the last sentence in this item by filling in the Selling Broker’s name.
• “The earnest money deposit shall be held by the Selling Broker’s Escrow Account.”
Item #4 Type of Financing
Be sure you check ONLY ONE of the boxes on the far left, depending upon whether your clients plan to use either FHA financing, or a Non-FHA source of purchase money.
• If FHA financing will be used, check the type of FHA financing:
1. 203(b) for properties listed as “IN” for Insurable,
2. 203(b), with escrow for properties listed “IE” for Insured-Escrow (for up to $5500 worth of repairs as detailed on the listing), or
3. 203(k). This renovation financing may be used for any HUD home unless the listing specifically states this particular property is not eligible for 203(k). Most condominiums are not eligible for 203(k) financing.
IMPORTANT NOTICE: If, on Item #3, “The agreed purchase price of the property is $_______” your clients want to bid an amount greater than the appraised value, AND they plan to use FHA financing, then HUD requires that the buyer(s) must pay the difference in cash in addition to their down payment amount at the time of settlement and closing. HVH will check that the Contract Package includes verifiable evidence that the buyers have sufficient cash available to meet this requirement. In addition to verifying the loan pre-qualification letter, the verification of funds must be made before the Contract Package will be approved and ratified by HVH on behalf of HUD.
IMPORTANT NOTICE: Listings that specify that the home is “IE” (Insurable with a repair escrow), will also specify the escrow amount (including a 10% contingency for a total amount not to exceed $5500). If your clients are planning to use the special FHA 203(b) financing to purchase an IE property, be sure to enter the escrow amount given on the listing screen on the Sales Contract on the last blank line in this Item #4. Do not add or subtract the repair escrow amount to any other amount written on the Sales Contract.
Be sure your clients understand that the repair escrow amount is not provided by HUD. It is simply additional funds that are being loaned to the buyers by their FHA lender in order for the buyers to have the necessary money to pay for the required repairs that must be made to the home within ninety (90) days after closing so that the home meets FHA Minimum Property Standards. The repair escrow amount will be paid for by the buyers as part of the monthly mortgage payment.
The Financing Section, Item #4, may be completed as follows:
• Please leave the three spaces for down payment, mortgage loan amount, and the number of months BLANK. Do not put anything in these blank spaces.
• If your clients are able to pay all cash so that no loan is involved, circle the word “cash.” Include a document that provides evidence of sufficient cash to close in the Contract Package. This might be a current bank statement or deposit slip, or a letter signed by a banker, CPA, or attorney.
• If a loan from a conventional lender will be used as purchase money, circle the word “conventional.” Include a pre-qualification letter from that lender. Veterans may use VA loans, but often the HUD homes will not meet VA requirements as to condition, so advise your clients to discuss this with their VA lender in advance.
Item #5 Closing Costs to be paid by Seller on behalf of Purchaser
HUD will pay up to five percent (5%) of the sales price in Pennsylvania, Delaware, Mississippi, and Alabama. For further information about what is included and what may not be included in this amount, please review the www.hooksvanholm.com web site Broker Information section for Allowable Closing Costs.
HUD will pay all closing costs identified in Housing Notice 2005-12; which can be downloaded from HUD clips; Form # Notice H 2005-12 This amount must be included on the bid and inserted on the line for Item #5.
Item #6 Brokerage Commissions Seller is to pay
• Item 6a. Your commission should be entered here. In no event may the selling broker’s fee exceed five percent (5%) of the bid price on line #3. Of course, the selling broker may request a fee less than 5%, which would increase the net to HUD and improve the offer and its chances of being the highest net bid on the property.
• Item 6b. (NOTE NEW PROCEDURE) Leave this line blank. The local listing agent’s fee is paid directly to their broker by separate agreement with HVH, and will not appear on the HUD-1 Settlement Statement.
Item #7 The NET Proceeds to Seller
Calculate the net proceeds to HUD by totaling Items #5 and #6a for the closing costs and commission, and subtracting that total from Item #3, the offered price. Write the net to HUD amount in the shaded area on the Sales Contract at Item #7. When you enter this bid electronically, make certain it is an exact match to the net amount that appears on the bidding screen. It rarely happens, but if two or more offers provide an equal net value to HUD and one is from an Owner Occupant, that one is the winner. If both are from the same type of buyer, then the computer randomly chooses the winner.
Item #8 Type of Buyer
Place a check mark in the box that describes your clients accurately.
IMPORTANT NOTE: If your buyers do NOT fit the Owner Occupant description, it is a Federal offense to state that they are Owner Occupants in order to enter the first ten (10) day bidding period. This is fraud, and may cause any or all of the parties to the Sales Contract, including the buyers, the broker, and the selling agent, to be investigated by HUD and other governmental agencies. Carefully read Paragraph O in the Conditions of Sale on the HUD-9548 for the potential penalties.
Item #9 Expiration of Contract and Closing Agent
All Property sales that are not subject to 203(k) financing must close within forty-five (45) days from the date the Sales Contract was ratified by HVH on behalf of HUD. Unless extended in writing by the M&M Contractor, the Sales Contract expires on the date that is 45 or 60 days after the ratification date. (See “Contract Extension” information in this handbook.) If there are early closing incentives, there will be a notice on www.hooksvanholm.com.
Finish this item by writing in the name of the HUD Closing Agent for your area, www.hooksvanholm.com or simply write “HUD Designated Closing Agent.”
Item #10 Contract as Back-Up
This is a major change to the new M&M Contract procedures. If your clients are willing to be in back-up position behind the highest NET acceptable bidder, please check the first box. Back-up offerors will be notified when applicable.
Item #11 Addenda Attached to Contract
The hazards of lead-based paint in older homes are well known, and HUD continues to make efforts to disclose the potential dangers, especially to families with young children. If you are making an offer on a home constructed prior to 1978, you must inform the buyers that there might be lead-based paint on the premises. Check the first box and include the Lead Based Paint addendum. It must be completed AND SIGNED by the buyers. Submit the original in your Contract Package. There is a case specific Lead Paint Disclosure Addendum with each listing. You must provide buyers of homes built before 1978 with a copy of the addendum and the pamphlet "Protect Your Family from Lead in Your Home." Copies of these pamphlets are available through the Environmental Protection Agency (EPA) and many real estate associations.
There are ALWAYS “other” addenda required, so check that box and be sure to have your buyers sign all the documents that must be included in the complete Contract Package. Also review the information in the “Forms” section of the web site www.hooksvanholm.com
Item #12 Purchaser Initials Regarding Earnest Money Deposit
IMPORTANT NOTICE: This remains one of the most overlooked items. Please do not neglect to have your clients place their initials in the blank in blue ink.
Item #13 Purchaser Certification Regarding Conditions of Sale and Conclusion
Signatures are very important. Each buyer signs his or her full legal name in blue ink and you print clearly the correct spelling of the name below the signature. Include each and every buyer’s Social Security Number, beginning with the signature, printed name, and SSN. Write the date the buyer(s) signed the Sales Contract. The signatures, names and SSNs go in the box that says “Purchasers: (type or print names and sign).” The SAME names and signatures must appear on each addendum; that is, do not let your buyers sign their full names on the Sales Contract and use just their initials and last name on any of the addenda.
The “Signature of Broker” is for your broker, the same signature as it appears on the SAMS 1111 and 1111A forms. This affirms that the broker of record has performed as promised when the HUD NAID number was applied for and broker registration was approved by HUD. If the broker is unavailable, a letter authorizing the person who does sign on his/her behalf must be included in the Contract Package. Do not forget to include the broker’s FIN (Federal ID Number, Tax ID Number, or Social Security Number) and the current NAID# as it is recorded with HUD.
Your name as the licensee who is the actual selling agent should be printed along with your direct phone number and fax number, on the line near the end of the first page of the Sales Contract.
When the Sales Contract is ratified, the signature in the box for “Seller: Secretary of Housing and Urban Development” will be an authorized employee of the M&M Contractor acting by Delegation of Authority for the HUD Secretary. Leave blank the area where it says, “This section for HUD use only.” HVH personnel complete “Authorizing Signature and Date.”
WHAT ARE THE REQUIRED ATTACHMENTS TO THE HUD-9548 SALES CONTRACT?
The following is a list of documents as of the date of this Handbook, but please remember, it is your responsibility to stay currently informed through our web site so that your Contract Package will be complete and correct when delivered on behalf of your buyers.
1. The HUD-9548 Sales Contract (1/99) that has been completely and correctly filled in, initialed and signed. Download and print the current edition from www.hooksvanholm.com. Signatures and initials must be in blue ink. Add the signed affidavit stating that the HUD-9548 Sales Contract content has not been altered in any way. Please take the time to review the instructions given above regarding completion of the Sales Contract. Your buyers depend on you to get it right!
2. Lead Based Paint Addendum to Sales Contract (For homes constructed prior to 1978.)
3. HUD-9548-D Owner Occupant Certification
4. Closing Date Extension Policy
5. Forfeiture of Earnest Money Policy
6. Copy of Signed Pre-Qualification Letter for the Loan (Make certain the statement that a Credit Report has been performed and reviewed by the lender is included.)
7. HUD-92564-CN signed by your clients on or before the Sales Contract signature date (Please review the Home Inspection Policy and Home Inspection Request forms. When it is time to request the actual inspection, follow the instructions given on those documents.)
8. Evidence of Cash to Close (Bank statement, investment account etc. This is required only when your buyers are paying all cash, or when there is a cash requirement above the down payment because the offer exceeds the “as is” appraised value for the property AND your buyers are getting an FHA loan.)
9. The documents that apply to the area where the property is located, if any
10. The special addenda that apply to Direct Sales Programs, if applicable
11. Copy of Earnest Money in form of Certified or Cashier’s Check or Money Order
Other Procedures:
LEAD BASE PAINT (LBP)
HUD has changed the guidelines regarding LBP and you will see a difference on both HVH website as well as on the bid requirements.
On December 23, 2003, HUD published Housing Notice 2003-30, Elimination of Lead-Based Paint Hazards in HUD Owned Single Family Properties.
A property constructed before 1978 and sold with any FHA-insured mortgage except a 203k rehabilitation mortgage, in which deteriorated lead-based paint has been identified, cannot close without a clearance certificate. HUD/HVH is responsible to order and have this work done prior to settlement and closing. (The procedure for FHA 203k rehab loan is described below)
For homes built before 1960 you will find a Lead Paint Inspection and Stabilization Plan along with a case specific Addendum on the listing and the bid results. All available lead records and reports should be downloaded for review with the Purchaser.
For homes built after 1959 and before 1978 that are being purchased with FHA financing, a Lead Paint Inspection will be completed by HUD/HVH after sales contract has been ratified. If required, Lead Paint Stabilization and Certification must be completed by HUD/HVH prior to closing. Your Purchaser must have the LBP Certification for closing an FHA loan.
Properties sold with FHA 203k loans require a 203k Rehabilitation Financing Lead Agreement requiring that a clearance examination and report be included in the work write-up and conducted before release of the final construction disbursement and before occupancy. At closing the Purchaser shall receive a credit in an amount to be determined by the GTR, representing the Seller’s contribution toward the cost of stabilization and clearance testing. The credit shall appear on the FORM HUD-1 SETTLEMENT STATEMENT and shall be deposited in the 203k escrow account. If the actual cost of stabilization exceeds the credit provided or if the property fails a clearance examination, the Purchaser will be responsible for any additional costs.
The broker needs to advise their purchasers of this new procedure and ascertain that their clients fully understand its contents.
Property Condition Report (PCR)
HVH is now required to provide a PCR on each property listed. In this report, you will find a systems inspection, any known disclosures regarding the property and an over all report of the condition of the property.
This does not take the place of a homeowner performing their own home inspection. HVH as contractor to HUD recommend that all purchasers have a third party home inspection performed. This is the only way a purchaser can protect themselves and be sure as to what they are buying. The broker needs to encourage their purchasers to set up their independent home inspection. HUD does not warranty the condition of any home. Homes are sold “As Is”. When bidding, you can include a home inspection fee on line 5 of the 9548 if sufficient funds are available not to exceed 5% of the sales price. HUD will pay the lesser of the amount requested in line 5 of the 9548 or the actual cost of the item specified. Any funds remaining after the allowable closing costs have been paid will not be credited to the purchaser at the sales closing.
HVH makes no implied or express warranties as to the functionality of any equipment or condition of the property, being mechanical, structural or condition including the remaining life expectancy of the home in any way form or fashion.
If you have studied this Handbook, reviewed the information on our web site, and asked for assistance if necessary, you have done your HOMEWORK. This checklist is provided to give you the assurance that nothing has been omitted.
1. My broker registered with HUD in SAMS and I know the NAID number
2. I have obtained the appropriate HUD keys
3. I have read and understood this Handbook and all the HUD documents
4. On my computer, I have followed the bidding process instructions on www.hooksvanholm.com
5. I have previewed HUD homes for sale in the areas of interest to my clients
6. We have in hand the required proof of proper preparation:
A Pre-Qualification Letter from a Lender (and/or Evidence of Cash, as necessary)
An Earnest Money Deposit Certified Check or Money Order in the correct amount
A complete and correct HUD-9548 Sales Contract Package, with the Conditions of Sale and other documents thoroughly read, understood in advance by all parties
7. We have selected the HUD home the buyers want to purchase
8. We filled in and the buyers signed the Sales Contract (HUD-9548 1/99) and Addenda [IMPORTANT NOTE: This is your only legal authorization to bid on behalf of your clients. DO NOT neglect this step prior to bidding!]
9. I have entered an offer to purchase in the form of an electronic bid on the web site
10. I printed the Bid Confirmation Screen
11. We received notice that our bid was selected
12. I ensured that the Contract Package was delivered on time to the HVH office
13. As proof, I kept a delivery service tracking receipt
15. If any additions or corrections were needed, I complied immediately
16. I received the ratified Sales Contract
17. I have deposited the Earnest Money in the Broker’s Escrow Account
18. Together my buyers and I arranged to complete their financing application and approval
19. We completed the Home Inspections
20. I contacted the Closing Agent to make an appointment for my buyers to close on time
Revised 10/20/05
