BUYING PROCESS

Welcome to buying a HUD home. This is a brief overview of the HUD buying process. Please review other information available on our site, and links to the HUD website for further information.

Buying a HUD Home is Different than Buying Other Types of Homes

There are a few things you need to know up front about buying a HUD home, since the procedures may be different than those used in buying other types of homes. HUD however, has made the procedure as efficient and convenient as possible. Here are some things you should know:
• Anyone can buy a HUD home
HUD homes can be purchased by anyone. While many homes are affordable, this is not a low-income program. Home may be bought by owner-occupants (who have a priority bid period for 10 days), and by investors, who can then bid along with owner occupants.
• HUD homes are sold at market value
HUD homes are initially priced for sale at the appraised market value. The buyer may offer any price, but HUD will only agree to offers that provide an acceptable return. Price reductions may take place later if the home does not sell.
• HUD homes are sold "As Is"
It is extremely important to understand that HUD homes are sold in "as is" condition. This means that the condition of the home when you see it is what you will be buying. HUD makes no warranties, does not guarantee the condition of any home, and does not verify that it complies with any local code or zoning requirements. You must make any necessary repairs after the purchase. HUD may make, or give you an allowance for, major system or safety repairs only if you are purchasing with an FHA-insured loan. It is very important that you get a Home Inspection by a licensed professional prior to closing on the sale.
• Deadlines must be met
When you buy another type of home, you can usually negotiate the contract and other transaction items over an unspecified period of time. When purchasing a HUD home, this is not possible. In order to be fair to all purchasers, HUD has imposed timetables that must be met, or your bid or contract will be cancelled and the home returned to the market. Once your bid is acknowledged as the highest net to HUD, for example, your agent must send in a correct contract within 48 hours or the bid will be cancelled. Generally, for the states of Alaska, Idaho, Oregon, Washington, North Carolina, South Carolina, Virginia and West Virginia, closing occurs within 45 days. HMBI cannot change the HUD deadlines.

Making an Offer on a HUD Home
• Offers must be made through a HUD registered broker
If you want to make an offer on a HUD home, you must bid through a HUD-registered broker. For a list of local approved agents, click on your state and then click on Agent Locator.
• How to find a HUD home
You should contact a broker as instructed above. These brokers will have a list of HUD homes from the MLS, which contains detailed information on the home. You can also look at available listings for your area here on this site under Property Listings, and then check with your broker for more information about the house. You may also see a HUD or HMBI sign on a home; these are placed on homes after the initial inspection and mean that the home is being readied for sale. To find out if the home is actually for sale, consult the MLS or the Internet listings.
• Offers must be submitted through an electronic bidding process
All offers must be submitted by your broker through an electronic bidding process. The electronic bids are stored in the computer system and, at the appropriate time, calculations are automatically performed to determine the apparent highest net offer to HUD.
The apparent highest bid is acknowledged by HMBI to your broker, who is notified to send in a correct, signed sales contract within 48 hours. If the contract is not received within 48 hours or is incorrect, the home will be returned to the market or acknowledged to the next highest bidder. All acknowledged bids are subject to cancellation for prior sale, electronic error, and other conditions (see Disclaimers). An acknowledged bid does not constitute a sale; only a correct contract that is counter signed by HMBI and returned to your agent allows you to proceed to closing.
• Initial Listing Period
New listings are available weekly on Friday mornings.
During the Initial listing period, bids may be submitted by Owner Occupants only during the first 10 calendar days.

Owner Occupant Priority Period.
All Owner-Occupant offers received during this 10 day Exclusive Listing, shall be considered to have been received simultaneously.  In order to be valid for the period, bids must be completed and confirmed on the Internet.
Owner-Occupant bids will be opened and reviewed and the highest acceptable net bid to HUD will be selected. Bids will be reviewed and posted daily at 1:00 p.m.

General Public Bid Period.
At the conclusion of the 10-day Exclusive Listing Priority Period, all general public bids will be accepted. These bids will be reviewed and the highest acceptable net bid to HUD will be selected.
In the event the property remains unsold after these bid openings, daily bids received by 11:59 p.m. will be reviewed and results will be posted the next day at 1:00 p.m.

Bids received on the same day shall be considered to have been received simultaneously.

Friday, Saturday and Sunday bids will be reviewed simultaneously on Mondays at 1:00 p.m., and the highest acceptable net bid to HUD will be selected.

In the event the property remains unsold, the bids (Owner-Occupant and General Public) will be reviewed and posted daily at 1:00 p.m. and the highest acceptable net to HUD bid shall be selected.  This listing will remain in effect until the listing has been sold or withdrawn from the market to be reanalyzed.   Bids must be completed and confirmed on the Internet before 11:59 p.m. in order to be valid for that day and will be opened the next day excluding Friday, Saturday and Sunday which will be opened on Monday.

• Contract must be submitted within 48 hours
If your bid is acknowledged, your broker must submit a correct HUD Sales Contract, along with other required forms and Addendums signed by you, to the HMBI Regional office within 48 hours. You may be required to submit proof of financing commitment or cash to close, along with other items. You should be working with your broker to put the required items in place before you bid on a home, so that you are ready when the time comes.

Closing on a HUD home
• Closings are 45 days for Alaska, Idaho, Oregon and Washington, South Carolina, North Carolina, Virginia and West Virginia.
After your contract has been received correctly, it will be signed by HMBI on behalf of HUD and returned to your agent along with a contract acceptance letter. For Alaska, Idaho, Oregon and Washington, North Carolina, South Carolina, Virginia and West Virginia this letter will give you up to 45 days to close. Once you are ready to close, you and your agent must schedule the date with the closing agent indicated on the letter, who also receives a copy of your contract. HMBI does not set the closing date; it is up to you.
If you use the HUD closing agent, HUD pays their fees. You may use your own agent, but then you must pay the fees. If you use your own closing agent, they must work with the HUD agent on some legal items.
• HUD will pay some closing and sales commission costs
Generally, HUD will pay up to 5% of your broker commission cost. In addition, HUD will pay up to 3% for standard closing cost items (excluding the closing agent fee which is paid for separately). These items are designated by the buyer and may include discount points, loan fees, title costs, surveys, and other items. HUD will also generally pay any outstanding seller costs such as outstanding tax or utility bills which relate to HUD's ownership.
• Return of Earnest Money
The following provisions are applicable in all instances except those where HUD is unable or unwilling to close the sale, in which case the entire amount will be returned.

Investor Purchasers:

• Uninsured Sales: 100% of the deposit will be forfeited to HUD for failure to close, regardless of the reason.
• Insured Sales:
• 50% of the deposit will be forfeited to HUD for failure to close if the purchaser is determined by HUD to be an unacceptable buyer.
• 100% of the deposit will be forfeited to HUD if the sale fails to close for any other reason.

- Owner-occupant Purchasers:

Return 100% of the deposit when:

• There has been a death in the immediate family (purchaser, spouse or children living in the same household).
• There has been a recent serious illness in the immediate family that has resulted in significant medical expenses or substantial loss of income, thus 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 a substantial loss of income through no fault of the purchaser.
• For an FHA insured sale, HUD (or a D.E. underwriter) determines that the purchaser is not an acceptable borrower.  For an uninsured sale, the purchaser was pre-approved for mortgage financing in an appropriate amount by a recognized 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.
• There is other equally good cause, as determined by HMBI, in keeping with the spirit and intent of the above policy.

Return 50% of the deposit when:

For an uninsured sale, despite good faith efforts by the purchaser, there is an inability to obtain a mortgage loan from a recognized mortgage lender.

Forfeit 100% of the deposit when:

• No documentation is submitted.
• Documentation fails to provide an acceptable cause for the buyer's failure to close. 
• Documentation is not received by HMBI no later than close of business on the tenth (10th) day following cancellation of the contract.

-Vacant Lot Sales:

The purchaser is considered to be an investor and instructions pertaining to investors will apply.

• Extensions of time
ALL SALES ARE EXPECTED TO CLOSE WITHIN THE APPLICABLE TIME FRAME IDENTIFIED ON LINE 9 OF THE SALES CONTRACT.

Closing Extension Request:  If the closing is not expected to occur on the specified date on line 9 of the HUD Sales Contract 9548, the Broker should contact HUD's Closing Agent at least two weeks prior to that date to request an extension.
HMBI, as HUD's Representative, may grant an extension of closing time and, if approved, each extension will be for a period of fifteen (15) days:

• Submit the "Request For Extension of Closing Date" (Extension Request form) and all the required supporting documents to HUD's Closing Agent prior to the expiration of the sales contract.

• Documentation submitted with the extension request must establish that a closing can reasonably be expected to occur within the extension period.

• The extension request must be accompanied by a cashier's check, money order or other certified funds in the appropriate amount and made payable to HUD. The fee is based on the Contract Sales Price:

  Contract Sales Price equal to or less than $25,000 Extension fee is $10 per day ($150)

  Contract Sales Price of $25,001 to $50,000 Extension fee is $15 per day ($225)

  Contract Sales Price over $50,000 Extension fee is $25 per day ($375)

• The initial 15-day extension will be provided for owner occupant purchasers, at no cost, if documentation is provided indicating that proper and timely loan application was made, that the delayed closing is not the fault of the purchaser and that mortgage approval is imminent.

• The extension fee will be retained by HUD.  In the event that the purchaser closes prior to the end of the extension period, the unused, prorated portion of the extension fee will be credited to the amount due at closing.

• The approval of an extension does not obligate HMBI, as HUD's Representative, to grant future extensions.