Rule Changes For HUD Home Sales Proposed By HUD

Since the real estate market bubble burst in 2008, the number of foreclosed homes that the U.S. Department of Housing and Urban Development (HUD) has had to manage and sell to investors and new home owners has increased significantly, averaging around 100,000 homes sold per year and hitting a peak of 111,416 HUD homes sold during fiscal year 2013.  As a result, HUD has proposed several changes with regard to the disposition of REO properties, or, in plain terms, how they sell HUD homes.  According to HUD, these changes “seek to provide greater efficiency in the administration of HUD’s property disposition program for REO properties….and provide flexibility in anticipation of future changes to the property disposition program for REO properties.”

Highlights of Proposed Rule Changes By HUD With Respect To The Disposition, or Sale of HUD Homes:

(We work hard on this and sure would appreciate a “Like”)[iframe http://www.facebook.com/plugins/like.php?href=https%3A%2F%2Fwww.facebook.com%2FStLouisRealEstateNews&send=false&layout=standard&width=50&show_faces=false&font&colorscheme=light&action=like&height=35&appId=537283152977556 100 35 ]
Want to Learn MORE About Buying HUD Homes?

Search ALL St Louis Homes For Sale

See ALL Homes That Will Be Open In St Louis This Weekend

  1. Appraisal of HUD REO Properties.  Establishes standards for appraisals to ensure consistency.  Also expands the valuation methods available to HUD to determine the value of property to be sold to insulted common alternative methods such as Broker Price Opinions (BOP’s) and Automated Valuation Models (AVM’s).
  2. Escrow Amount for Properties Needing Repairs.  Currently, buyers of HUD homes,  can obtain an FHA mortgage to buy homes even if the property does not meet FHA’s minimum property standards by putting money in escrow for the repairs. At this time, the maximum amount of repairs needed cannot exceed $5,000 for the buyer to be eligible for an FHA mortgage with a repair escrow and the new rule proposes to increase the repair escrow maximum to $10,000 allowing buyers to obtain FHA financing on homes that are in need of more repair.
  3. Listings. Proposed changes clarify that HUD has the authority to “allow for a number of listings options….that real estate brokers may use to list REO properties.”  In addition, it would require the purchaser’s broker to submit bids through HUD’s designated electronic bid system rather than through the listing broker.
  4. Closing costs paid by HUD.  Currently, owner-occupant purchasers are allowed to request that HUD pay all, or part, of their financing and closing costs, as well as the broker’s commission, up to a maximum amount.  The proposed change would remove HUD’s obligation to pay the broker’s sale commission and specify that closing cost assistance is not available to investors.
  5. Bid Process.  The proposed rule would make winning bids on HUD homes available publicly rather than “making them available for inspection at a time and place designated by the HUD local office.”  However, losing bids would no longer be made available either through electronic posting or through the HUD local office. In addition, it would allow the high bidders executed contract to be deemed final when emailed to the asset manager rather than mailed.

The above is just my summary of the rule changes highlighting the things I believe are of interest to most buyers of HUD homes.  To see the complete proposed rule click here.

Public comments on the proposed rule are being accepted by HUD until December 1, 2015. If you would like to comment on the proposed rule change you can do so online here

Print Friendly, PDF & Email

Comments are closed.