Frequently Asked Questions

HUD Properties

What is a HUD Home?
Who can buy a HUD home?
How can I buy a HUD home?
How can I find a HUD home?
What is Owner Occupant Period?
When can an Investor submit a Bid?
How do I get access to the properties?
Can I submit more than one bid for different properties?
What is FHA financing?
How is the repair escrow amount determined?
How do I determine the mortgage amount when there is a repair escrow?
Will HUD pay for any closing costs and selling agent's commission?
What are Bid Results?
Why do I have to get a Pre-Qualification Letter before I bid?
How long do I have to close?
What does the As-Is Price mean?
Why are the List Price and As-Is Price sometimes different?
What is a “Daily” bid status?
 

 

HUD Properties

What is a HUD Home?

When someone with a HUD insured mortgage can't meet the payments, the lender forecloses on the home; HUD pays the lender what is owed; and HUD takes ownership of the home. HUD then sells the home at market value through a Marketing & Management Contractor such as PEMCO.

Who can buy a HUD home?

Anyone who can qualify for a mortgage or who can pay cash may buy a HUD home. Owner occupants must live in the house as their primary residence for at least one year and may not purchase another HUD home as an Owner Occupant for two years. Buyers must use a broker or agent who is registered with HUD to place a bid on a property.

How can I buy a HUD home?

We will submit your bid for you. Normally, HUD Homes are sold in an "Offer Period." At the end of the Offer Period, all offers are opened and considered to be received simultaneously, and, basically, the highest acceptable net bid is accepted. If the home isn't sold in the initial Offer Period, you can submit a bid until the home is sold. Bids can be submitted any day of the week, including weekends and holidays. They will be opened the next business day. The results from the review of all accepted bids are posted on the PEMCO website. We will check the website for accepted bid information and ensure that all the required forms are properly filled out and sent to PEMCO within two business days of acceptance.

How can I find a HUD home?

HUD homes are listed on the Vestlet website, the local MLS and at WWW.HUDPEMCO.COM.

What is Owner Occupant Period?

When a HUD property is first listed for sale to the general public, bids can be submitted by all potential purchasers, however, it is available to Owner Occupant Purchasers "only" during the initial priority period as specified below. All bids placed by Owner Occupants that are submitted during this priority period are considered to have been received as though they were received simultaneously. If there are no acceptable owner-occupant bids on the last day of the priority period, then bidding becomes available to all purchasers on a daily basis, with no priority given to owner/occupant bids.

GEORGIA - 12-day Owner Occupant Priority Period

During the first 12 days a HUD property is listed to the general public, it is available to Owner Occupant Purchasers only. All bids placed by owner occupants that are submitted from day 1 through day 12 are opened on the 13th day and are considered as though they were received simultaneously. If there are no acceptable owner-occupant bids on the 13th day, then bidding becomes available to all purchasers on a daily basis, with no priority given to owner/occupant bids.

New listings for the owner occupant priority period take place on Wednesday of each week with the first bid download scheduled 13 days later; (the 2nd Monday morning following the Wednesday listing.). Investors are allowed to submit their bids during the 12 day owner occupant priority period; but investor bids will not be considered if there is an acceptable owner occupant bid. If there are no acceptable owner occupant bids, investor bids will be considered and may be awarded on the 13th day; (the 2nd Monday morning following the Wednesday listing.).

When can an Investor submit a Bid?

When a HUD property is first listed for sale to the general public, bids can be submitted by all potential purchasers (including investors), however, it is available to Owner Occupant Purchasers "only" during the initial priority period as specified above. All bids placed by Owner Occupants that are submitted during this priority period are considered to have been received as though they were received simultaneously. If there are no acceptable owner-occupant bids on the last day of the priority period, then bidding becomes available to all purchasers on a daily basis, with no priority given to owner/occupant bids.

How do I get access to the properties?

Email us and we will schedule a time to show you the properties.

Can I submit more than one bid for different properties?

If an Owner Occupant submits multiple bids for different properties PEMCO will select and award the bid that has the highest acceptable Net to HUD for that property. If an investor submits more than one bid, they can win more than one property if they are the highest bidder.

What is FHA financing?

There are three main types of FHA Financing. More information may be obtained from any mortgage company familiar with FHA Guidelines for the various programs.

(1) 203(b) Regular FHA Loan - Listed as "IN"

• If the Property does not have any mandatory repairs FHA will insure the Loan hence the classification of "IN"

 

(2) 203((b) - Repair Escrow - Listed as "IE"

• When a property has less than $5000 in repairs to bring it up to Minimum Property Standards, FHA will insure the loan provided the repairs are completed by the Buyer or the Buyer's agent within 90 days from the date of Closing.
• It is a cost to the Buyer that the Buyer can finance and add the amount to the mortgage.
• The Lender monitors and keeps the funds in an escrow account for disbursement on completion of repairs to the Lender's satisfaction.

 

(3) 203(k) - Rehab Loan - Listed as "203K"

• When the property has more than $5000 in Minimum Property Standards repairs to be done.
• The Lender must obtain an Inspection report from an approved 203(k) consultant and a new appraisal.

 

How is the repair escrow amount determined?

The FHA appraiser lists the estimated cost of repairs needed to bring the property up to minimum FHA standards. This amount is then multiplied by 110% and this amount is listed as the repair escrow amount. Example: if repairs total 1,000.00 x 110% = 1,100.00. The Repair Escrow amount will be listed at $1,100.00.

How do I determine the mortgage amount when there is a repair escrow?

The DE Underwriter will determine the final 203(b) mortgage amount. The DE Underwriter will take into account the repair escrow amount to determine the FHA loan amount. The DE underwriter will determine this amount. Regardless of whether or not a repair escrow will be used in the purchase of a home, the lines on the Sales Contract that request the down payment amount and the secured mortgage amount should be filled in "TBD" (To Be Determined). The line associated with the length of the loan should also be filled in TBD. Please remember that the repair escrow amount needs to be filled in only if the buyer is using 203(b) repair escrow financing.

Will HUD pay for any closing costs and selling agent's commission?

HUD allows up to 5% Real Estate Commission. Although HUD may pay for these costs, keep in mind that the higher the closing cost and commission will reduce your Net to HUD and may affect your competitive bidding ratio. For more information, ask your real estate agent or the listing broker.

HUD will allow to be deducted from its proceeds, purchaser financing and closing costs that are considered to be reasonable and customary in the jurisdiction where the property is located. In no event may these costs exceed 3% of the property's gross purchase price.

What are Bid Results?

Bid Results - whenever a bid is accepted, the results are posted on the PEMCO website under "Bid Results" the same day. By checking the Bid Results, we will know to deliver the complete sales contract package within two business days or 48 hours of acceptance to the PEMCO Office.

Why do I have to get a Pre-Qualification Letter before I bid?

A Pre-Qualification Letter must be obtained prior to bidding on a property. This is to avoid having to tie up the property with a transaction that is unlikely to close. The Pre-Qualification letter must be directly from the lender (NOT the mortgage broker) giving a current date and an amount of the loan that is acceptable. It should also include the name the buyer(s) whose credit report was reviewed and approved by the lender.

How long do I have to close?

45 days after the contract is accepted by HUD.

What does the As-Is Price mean?

The As-Is price is the appraised value of the house. This is an actual appraisal conducted by a certified appraiser. It is completed after HUD receives the property from the FHA and before it is placed on the market.

Why are the List Price and As-Is Price sometimes different?

When a property initially comes on the market through HUD, the list price and As-is price are the same. Once the property hits the second bid period you will see a 10% reduction in the sales price. So the difference in sales price and As-is price represents a reduction in the sales price. We provide a quick view to see how many times a property has dropped in price. Each drop represents 10 percent so, for example, 3 times drop in price is 30% below the As-is price.

What is a “Daily” bid status?

Properties that have a “daily” bid status can be bid on any day and the results will be posted the following business day. On our hotsheet that comes out every Friday, the bid deadline is the following Tuesday. If any properties do not sell from the previous Friday Hotsheet, those properties turn to a daily status.