BID REQUIREMENTS Owner/Occupants (O/O) must live in property
as primary residence for a minimum of 1 year.
Cannot purchase a HUD foreclosure as an O/O
for a minimum of 2 years.
Can purchase a HUD foreclosure as an
Investor.
Lender Approval Letter or Proof of Funds cheat
sheet on pages 9 & 10 in packet
Earnest $ payable to HUD:
$50,000 and below - $500
$50,001 and up - $1,000
SOME DO’S AND DON’TS
• DO: – Schedule showings with List Agents. The key
system has changed and you may not be able to access.
– Coordinate closing with List Agent for lockbox removals.
– Verify Buyer(s) qualifies/has cash prior to bid • FHA and FHA 203(b) and 203(k) have different credit
score criteria. Just because they qualify for FHA does NOT mean they will qualify for FHA with escrow products.
• DON’T: – Bid with VA or Rural Development products unless
there are NO repairs required or suspected from your own showings. VA and RD do NOT mix with HUD!
– Allow any access without Selling Agent being present.
– Worry about condos on approved lists! HUD condos will ALWAYS go FHA approved but may have to be 203b or 203k if repairs are required.
– Allow ANY repairs prior to close.
– Threaten the firm and firm agents ability to work on HUD property transactions. ONE agents actions can create a NAID being pulled from EVERYONE!
OBS
• Other Bid Selected
– They accepted another bid, for a limited time only, you may view to see what amount the property went under for.
BID RESULTS (cont’d) If bid is CA - Cancelled, Asset Management
Company will often send an email with the
lowest net amount that HUD will accept that
round.
Typically, you have until midnight on the day
you received the email from HUD to re-bid.
Anyone who has placed bids on that property
will also receive the email from HUD with lowest
CURENT net amount they will accept. So there
is NO telling how much competition you may
have at that time!
Do NOT treat this as a COUNTER – it is a
DISCLOSURE!
BID RESULTS (cont’d)
HOW THE DISCLOSURE EMAIL WORKS:
Your email states HUD will accept a net of
$55,100 for this round
Because there is a 6% commission, divide the
net amount by .94 or 94% to get gross
55,100/.94 = 58,617.02
$58,618 will be the lowest HUD will accept this
round.
SUBMITTING A BID (cont’d)
• If bid is accepted:
– You have 48 hours to submit a complete contract package to that property’s assigned Asset Manager.
– Asset Manager will send appropriate Addendums to you via email.
– Your Broker will be copied on bid acceptance also.
CONTRACT REQUIREMENTS
NO TAR CONTRACTS
Check with your Broker on which State forms
you will need for FIRM files
Confirmation of Agency ?
Exemption of Disclosure ?
Disclaimer?
HUD will NOT process, recognize or sign any
state forms submitted.
SUBMITTING A CONTRACT SEE CHEAT SHEET PAGES 9-10 IN PACKAGE:
All bidders must have:
• A pre-approval letter, whether it is financed or a cash
transaction. Specific requirements!
• CASH TRANSACTIONS LETTER:
• On Letterhead
• Signed and Dated
• RE: Property Address and Purchaser(s) Name as
it appears on Bid Submission
• Must state “$xx,xxx for purchase consideration of
123 Main Street”
• They will accept a “screen shot” of account but
MUST have bank or financial institution stamp on
it.
• FINANCED TRANSACTIONS: – On Letterhead
– Signed and Dated
– RE: Property Address and Purchaser(s) Names –EXACTLY HOW APPEARING ON BID SUBMISSION
– Type of Loan: Conventional, FHA 203(b), FHA 203(k)
– Amount of accepted BID – must be equal to or above
– Amount of escrow required, if any
– Amount of HUDs allowable closing costs, if any
– Must state buyer has been PRE-APPROVED
– Must state CREDIT REVIEWED
– Must state Property Address
• Earnest Money PAYABLE TO HUD IN CERTIFIED FUNDS:
– Contracts $50,000 or below = $500
– Contracts $50,001 and above = $1,000
• Signed Contract.
• Copy of Confirmation Page of Bid
Pemco and OFORI – Online is best method to
execute document package. HUD-9548 Form is
the Contract Form. Please use this for all
accepted bids – It can be filled out on-screen
and will compute the net to HUD also.
FirstPreston HT – They will EMAIL you a
prepopulated contract package.
Some errors require original signatures
therefore additional overnight fees will apply.
SLOW DOWN and use your checklists
PAGE 6 IN YOUR PACKET:
What is amendable and what is not on HUD Sales Contracts:
Amendable:
1. Financing type can be amended from FHA to conventional or cash OR from
Cash to conventional to FHA if eligible. Lender letter or proof of funds will
required to make the change. (If changed: termite and LBP reimbursement
or disqualification may apply)
2. Additional purchasers can be ADDED but at least ONE primary purchaser
must remain on contract..
3. Amount of repair escrow can be amended on 203(b) with repair escrow with
supporting documentation not to exceed $5,500 + 10% cushion ($5,500
max)
4. Address corrections with supporting documentation if it can be after
research.
5. Closing Date – extension request process applies.
PAGE 7 IN YOUR PACKET
Not Amendable:
1. Sales price.
2. Primary Purchaser: Additional purchasers can be added or removed by
amendment only.
3. Amount of Earnest $.
4. Net to HUD amount.
5. Closing Cost amount or Concessions.
6. Agent and broker commissions.
7. Purchasers Social Security Number.
8. NAID number.
9. Moving from Investor to Owner Occupant OR Owner Occupant to Investor.
PAGE 8 IN YOUR PACKET:
TOP 10 REASONS CONTRACTS NEED CORRECTIONS:
1. LINE 12 – buyer forgets initial.
2. Name on contract does not match name on bid- ALWAYS attach copy of
bid confirmation. (HUD usually allows corrections of misspellings provided
the agent sends a copy of the SS card AND drivers license for back-up
documentation.)
3. FINANCING type on contract should match way a property was
advertised.
4. LBP Addendum: BROKER must INITIAL – not use checks marks.
5. Lender Letter does not indicate all required items. SEE CHECKLIST.
6. Money orders or other certified funds for EM must be payable to HUD.
7. $ amounts on line 5, 6a, 6b, & 7 do not MATCH bid.
8. Buyer/Broker signs in HUD space on 9548 form.
9. Authorization Letter not included for agent to sign on behalf of broker.
(POA – when using sign in following format: “Broker of Record Name, By
Person Signing contract, POA”
10.Not following all instructions on the correction email.
HOME INSPECTIONS
Must be performed by a Licensed Home Inspector
within 10 days of contract being accepted by HUD
Selling Agent must complete and fax Home
Inspection Request Form to HUD prior to
performing home inspection
Form can be found on www.hudhomestore.com
Contract may be cancelled if this procedure is not
followed
Selling Agent must be present for home
inspection
INSPECTIONS All inspections must be completed within 15 days of
contract being signed by HUD’s representative
Home Inspection must be performed by a Licensed
Home Inspector.
Once HUD signs contract, the appropriate FSM’s
Utility Activation Request form will be forwarded to
the Selling Agent for completion and Buyer(s) and
Agent’s signatures.
Submit document with RE-WINTERIZATION FEE
($100-200) to the FSM. This is required from October
1st through March 31st.
**Do NOT turn on utilities until you have written
clearance from the FSM!**
HOME INSPECTIONS
Must be performed by a Licensed Home Inspector
within 10 days of contract being accepted by HUD
Selling Agent must complete and fax Home
Inspection Request Form to HUD prior to
performing home inspection
Form can be found on www.hudhomestore.com
Contract may be cancelled if this procedure is not
followed
Selling Agent must be present for home
inspection
INSPECTIONS (cont’d)
Buyer is responsible for turning on/off all utilities
and the associated fees.
Utilities can only be on for 72 hours (business
days).
Contract MAY be cancelled if this procedure is
NOT followed.
Selling Agent MUST be present for all inspections
!!NO EXCEPTIONS!!
If damage/vandalism is discovered, a Property
Damage Report must be completed and faxed to
the appropriate fax number listed on the form.
Reporting damage/vandalism doesn’t guarantee
the problem will be corrected, nor does it
guarantee price adjustments will be made.
Buyer should also perform a visual inspection of
property near signing the contract and 1-2 days
before the closing.
HUD will not make any repairs or adjustments
post closing.
INSPECTIONS (cont’d)
HUD ADDENDUMS ANOTHER DIFFERENCE IN THE
TRANSACTION PROCESS UNDERSTAND THESE DOCUMENTS
AND EDUCATE BUYER(S)
APPRAISALS
• This is a big change for HUD assets
• Buyer must do own appraisal for FHA
• No longer disclosing the Appraisal price on HUDHomeStore
• List price MAY be OVER appraisal price on file with HUD
• HUD appraisals are NOT recorded
EXTENSIONS
• Remember NO STATE FORMS
• You must submit a HUD Extension Request Form
• An extension fee must be included with submission, UNLESS you have PRIOR approval to not include fee
– Form MUST be submitted 5 days prior to expiration for processing else you risk loss of bid and buyer earnest money
Process Overview
• Buyer must choose Title Company for closing
• HUD will pay settlement fees but MUST be included in line 5 at time of bid submission and if there are funds remaining to pay
What to send to WHO Asset Manager
• Original Signed Contract Package
• Buyer Select Escrow/Settlement Company Addendum
• COPY of Earnest Money check made out to Title Company
• 2 DAYS STILL REQUIRED
Listing Broker
• COPY of 9548 Contract form
• COPY of Buyer Select Escrow/Settlement Company Addendum
• ORIGINAL Earnest Money Check
• SAME TIME YOU SEND TO ASSET MANAGER
Listing Broker will deliver EM to Buyer selected Title Company
within 2 days after contract ratification
Extensions
• Complete extension form
• Extension fees sent to Asset Management Company
• Extension fees made payable to HUD
• Updated Lender Letter or Proof of Funds required
• Submit within 5 days prior to expiration of contract
First Time Title Companies
• Each office, even multiple locations, must register for and receive a HUD Closing Agent Identification number
• Cannot pre-register at this time
• Have to apply upon request or buyer choosing to use
• Contracts will NOT be ratified until the Closing Company has received their ID #
Title Company Process
• ID # assigned by HUD
• Approximate time for ID# to be assigned is 2-3 business days so will delay minimally
• Once company has ID# they will use same # for future closings
• Title Company will receive Ratified documents, Pre an Post Closing Instructions, and Wiring Instruction
Pre-Closing Activities
• Establishes closing file
• Receives contract and instructions from Asset Management
• Receives EM from List Broker within 2 business days of contract ratification
Pre-Closing Activities
• If List Broker does not receive EM within 2 business days they process NO RECEIPT to Asset Manager and they cancel bid
• If Closing Agent does not receive the EM within (3) days of receipt of ratified contract, Closing Agent returns contract as NO EARNEST MONEY RECEIVED on 4th day