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If you are considering purchasing a home or refinancing—you can go to quickenloans.com or lendingtree.com along with local mortgage lenders in your area—to determine what loan will best suit you—and your family. You can compare closing costs, APR's and Par rates to determine what loan will best serve your—and your family's long-term interests.
HUD homes are homes that were initially financed with an FHA insured loan. The property owner then went into default and the property was “foreclosed” on by the lender.
Because FHA insured the property they would then pay off the lender for the insured amount and in many cases regain possession of the property.
HUD homes in Georgia can be financed by Conventional Loans, FHA Loans (low 3.5% down-payment—620 middle credit score needed), Rehab Loans and Cash. There are also certain homes in Georgia that are eligible for the $100 down payment if you are an owner occupant purchaser.
Foreclosure is a legal proceeding instituted by a lien holder (lender) to enforce the debtor (homeowner) when he or she is in default of the debt or fails to perform some act to which he or she is bound.
Foreclosure results in a public sale of the property covered by the lien with the proceeds of the sale used to pay or satisfy the lien holder’s (lender's) claim.
If the home was an FHA financed home that was insured by HUD the home would go back into HUD's inventory "after foreclosure by the lender" since HUD "insured" the property and paid off the lender.
Foreclosure also terminates all rights of the
debtor in the property including the debtor’s right of equity redemption (prior
to foreclosure the debtor can pay all fees and amounts owed and retain
possession of the property). This is true in most states.
Is A HUD Home Right For Me?
When a property goes to HUD as a result of a foreclosure HUD assigns an asset manager and the property is subsequently listed with a real estate brokerage company that they have listing agreements with.
The properties are then sold to owner occupants, investors and non-profits using an online bid format that is then followed with a paper contract if your bid is accepted.
On many occasions you can find properties that need relatively minor repairs well below the current market value.
As with any home purchase—buying properly on the front end (at the time of purchase) will pay great dividends on the back end (at the time of sale). Therefore, it is important that you purchase a HUD home—or any home in the right manner.
If you are seriously considering a HUD home the following information and advice could prove to be invaluable—as you will be in a good position—to decide if purchasing a HUD home is right for you at this time.
How do I purchase a HUD Home in Georgia?
The process of purchasing a HUD Home varies from state to state and region to region. It is important that you select a real estate agent who is active in your area, is HUD certified and knows the process.
In Georgia HUD properties are updated regularly. Bidding is normally done on a daily basis on much of their inventory and HUD usually accepts the bid that gives them the highest net—and is at an acceptable amount.
In order for the bid to be submitted—you and your agent must complete the HUD Contract (Form 9548) and electronically transmit the contract and bid amount.
If you are an investor you can normally bid "after" the owner/occupant bidding initial period is up.
Investor down payment requirements are also higher than that of an owner/occupant and non-profits—and there are many incentives available to owner occupants and non-profits—that are not available to investors.
You must also sign and date an addendum that states that you are electronically filing contract 9548 (Certification of Accuracy) and you and your agent will receive a confirmation number for the case number (property) that you are bidding on.
Falsifying information on the HUD 9548 contract or any other form of the Department of HUD is a felony that is punishable by a fine not to exceed $250,000 and/or a prison sentence of not more than two years (18 U.S.C. 1010, 3559, 3571).
As a purchaser you would have to sign and submit a Radon Gas and Mold Notice and Release Agreement (9548-E), a Lead Based Paint Addendum if built before 1978, a forfeiture of Earnest Money Policy Addendum, an Individual Owner Occupancy Certification Addendum (9548-D) and possibly other addendum.
Always be aware that HUD homes are sold As-Is and you are responsible for the home inspection prior to submitting your bid.
If you have your home inspection performed after you submit your bid and offer contract have your agent state in the contract that the sale is contingent upon a satisfactory home inspection.
Keep in mind you may lose all or some of your earnest money deposit if you do the inspection after the contract is accepted by HUD.
When you and your agent decide on a house that you would like to purchase you must submit an “Earnest Money Deposit" with the offer contract.
$1,000 would generally be needed for a property with a purchase price of $50,000 or more and $500 would be needed for a property priced under $50,000.
The Earnest Money Deposit MUST be in the form of “Certified Funds” meaning it must be a” Cashier’s Check, Money Order or Bank Certified Check” made payable to the “Selling Broker.”
For vacant lots, the Earnest Money must be 50% of the list price.
You (purchaser) must have submitted certified funds payable to the Selling Broker "prior to" the electronic bidding.
The Selling Broker must also certify that they have fully explained the earnest money forfeiture policy to you and that they shall deposit the certified funds by the next business day following HUD’s acceptance of the contract.
If HUD does not accept the contract, the broker (agent) shall return the certified fund’s in the manner it was received to (you) the purchaser(s) by 4:00 pm on the next business day following HUD’s declination of the contract.
At the time of the offer you (purchaser) must also submit a “pre-qualification letter” from your Broker on the Broker’s letterhead stating the amount that you have been pre-qualified for.
If you (purchaser) overbid the FHA appraised (AS-IS) value amount that is listed and you are obtaining FHA financing—you (purchaser) would have to pay the difference in cash at closing.
If you are making an all cash purchase—that too must be proven, verified and submitted to HUD on your Broker’s letterhead.
If you are a non-profit or charitable organization whose mission is to purchase, rehab and resell or rent properties you will have to sign a “Land Use Restriction Addendum.”
You must realize that the Addendum “WILL” survive closing—meaning if fraudulent use or other unscrupulous use of the property occurs after closing—you (purchaser) and/or the organization—can be held liable.
The” Land Use Restriction Addendum” normally terminates after five years.
OK—So Let’s Recap
• Prior to purchasing your HUD Home you should be pre-qualified and have a $500 or $1,000 Earnest Money depending on the price of the property.
• If you choose FHA financing and you are purchasing as an owner-occupant you may be eligible for $100 down if you are purchasing in Georgia.
• Broker Bonuses are available in certain states and at certain times.
• You and your agent will submit a bid online and an original sales contract will also be submitted if your bid is ultimately accepted by HUD.
• Be sure that all purchaser(s) are on the contract and their name(s) are signed and printed in the same style.
• The purchase price must be rounded to the nearest whole dollar amount. Conventional Financing and a Cash Purchase is always an option on HUD Homes.
• You can choose among various financing. If the property is in decent condition FHA will normally “insure” (you will see—“IN” listed near the photo) the property and you could choose an FHA 203b loan. If the property is listed (IE) that means it is “insurable but there is an escrow fund set aside” for what are normally minor repairs—by being insurable it too would qualify for FHA 203b financing.
• If the property is listed as (UI) that means that the property “is not insurable” with FHA 203b financing but could still be purchased with FHA 203k (Rehab Loan in addition to standard loan) financing. Use caution when purchasing a HUD property that is uninsurable (UI) as they usually have major repairs that are needed whether they are readily apparent to you or not.
• Per HUD contract closing costs cannot exceed 3% of the purchase price.
• Selling Commission cannot exceed 5% of the purchase price—if you are purchasing as a non-profit you would not have to enter any amount.
• If you are purchasing the property as an owner/occupant you must occupy the property for 12 months after closing and you could not have purchased a HUD Home as an owner-occupant within the past 24 months.
• If you are an Officer, Teacher, Firefighter, EMT or Non-Profit purchaser you may be entitled for an additional discount on the purchase price if the property qualifies.
• You must close with a HUD designated Attorney and the closing must be 45 days or less—if 203k financing is sought—60 days or less. Extension Addendums are available, however there may be a fee to extend the closing deadline.
• Lead Based Paint Addendum must be attached if the property was built prior to 1978. Other addendums must be attached if applicable to the contract.
• All purchaser(s) must sign and initial the offer contract.
• As a purchaser your identification and contact info will be needed on the offer contract.
• The Real Estate Broker must include all contact info on the offer contract—including signatures, agent’s name and phone number and other identification information.
A Quick Checklist of What Will Be Needed From You By Your Real Estate Broker:
1. Copy of Earnest Money Deposit Check
2. Earnest Money Certification Form
3. Electronic Filing Addendum
4. Forfeiture and Extension Policy—Version 11-13-06
5. Lead Based Paint Addendum
6. Owner Occupant Certification—HUD Form 9548-D Dated 1/98
7. Radon Gas and Mold Notice and Release Agreement—HUD Form 9548-E Dated 06/2004
8. For Your Protection Get A Home Inspection—HUD Form 92564-CN Dated 06/2006
9. Pre-Qualification Letter—Version PEMCO-CLTR 11/2006
10. Over-bidding with FHA Financing—must use FHA
AS-IS appraisal and pay difference in cash
Still can't make your mind up...
If after absorbing all of the above information you are still unsure if you want to purchase a HUD home—you can go ask a HUD certified broker in your area how the process works—as there are variations from state to state and region to region.
Also realize that when you purchase a HUD home in Georgia—you will receive as a Grantee a "Special Warranty Deed" which gives you less protection on title claims—than the "General Warranty Deed" that you would normally get from the seller in a traditional sale.
Be sure to purchase "Owner's" Title Insurance at closing to protect your interests.
Keep in mind the protection limit is usually the purchase price, so if your property increased in value in the future and you filed a claim you would only be protected up to the purchase price—not what the property would be worth at the time of the claim.
In addition you can go to the HUD website below, or if you are in Georgia you can click here to find a HUD Certified Broker who has been effectively serving the Metropolitan Atlanta Area since 2002.