Successful HUD Home Sales Process Explained

A HUD Home Successfully Sold Presented by [Your Name], [Company]

HUD the Big Picture The Department of Housing and Urban Development HUD The Homeownership Centers Philadelphia HOC Santa Ana HOC Denver HOC Atlanta HOC Mortgagee Compliance Manager (MCM) One Nationwide Marketing and Management Field Services Manager (FSM) One per Area Asset Managers (AM) One per Area

Quality Control Flow Chart MCM Receives Property (Ensures Condition and Marketability) Buyer Select Closing Agent (Ensures Title is Clear and Marketable) Mortgagee Initiates FHA Claim (Conveyance to HUD) FSM Inspects (Ensures Safe Secure & Marketable) AM Markets (Ensures Marketable Condition) QC to FSM If Marketability Issue Reject Initial QC If Issue Reject QC to MCM If Safety Issue Reject Verifies Title for Buyer Conveyed back to Mortgagee

Raine Areas

Inventory Inventory in all area remain low, so bidding has been competitive. Bids often come in over the initial listing price. The foreclosure and rental moratoriums have been lifted.

Selecting a BSCA Best if they understand the HUD process Leads to a faster closing Closing Agents that have been issued Title ID Numbers can be searched at www.HUDHomeStore.com Closing Agents without Title IDs can be approved be will add time to the closing process

Responsibilities of the Selling Agent Complete Buyer Select Closing Agent Addendum Remit Earnest Money Check to Listing Agent Esign the contract Ensure Buyer and BSCA esign the contract

Accepted Offer and Executed Contract Buyer, Selling Agent and Closing Agent will be sent a copy of the Esign Envelope upon bid acceptance. It must be signed within one day. Buyer, Selling Agent, Listing and Closing Agent will be sent a copy of the executed contract. Earnest money will be delivered to the BSCA within 2 business days.

Refund of Earnest Money Prior to contract execution the Listing Broker will be responsible for refunding Earnest Money After contract execution the BSCA is responsible for disbursing Earnest Money

www.hudhomestore.com

Registering for Bidder Account Will need NAID number (obtain from Broker) In the top right corner click Bidder under the Register Box Create User Name and Password. Bidder Registration Page

Searching for Properties The State or Case Number is a required field All other fields can be used to narrow your search Property Search

Financing Codes Cod e IN Indicates Description Insurable Property meets FHA 203(b) financing requirements. No obvious repairs necessary to insure an FHA loan Property eligible for a 203(b) FHA loan with repairs that total less than $5,000 Property is not eligible for FHA mortgage insurance in the property s as is condition and requires more than $5,000 in repairs IE Insurable w/ Escrow Uninsurable UI

Property Condition Codes Code F Indicates Flood Zone Description Property is located in an area where coverage under the National Flood Insurance Program may be required to obtain a loan Property is covered by a Homeowners Association which may require HOA fees and dues to be paid by the owner Property was built before 1978 and may contain lead-based paint. Note: LBP Addendum Form must accompany the sales contract HOA Homeowners Association LBP Lead-Based Paint

Listing Periods New Listings are available daily Lottery Rounds Lottery Rounds before properties are available to the general market Only for GNND Buyers, Government Agencies and Non-Profits Seven (7) day period * Owner Occupant Priority then opened to all bidders

Owner Occupant Priority Uninsurable : 5 day Exclusive Listing Period Sealed Bidding Insurable/Insurable with Escrow : 30 day Exclusive Listing Period 10 day Sealed Bidding 20 individual 24 hour bidding periods Day 31 the property will be in an Extended Listing Period

Owner Occupants Effective March 1, 2022 HUD will increase the Exclusive Listing Period for Owner Occupants from 15 days to 30 days. The sealed bid period will remain 10 days Non-Owner Occupants bidding as an Owner Occupant can face up to 5 years in prison and a $250,000 fine.

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Submitting a Bid The information entered on the bid submission page will become the first page of the sales contract Bid Lines: Line 3: Offer Price Line 4: Type of Financing Line 5: Closing Cost Line 6: Agent Commission Line 7: Net to HUD Line 8: Buyer Type Review your bid and confirm to submit.

Winning the Bid NET TO HUD IS KEY NOT THE PURCHASE PRICE

Calculating NET Purchase Price (less) Closing Cost (less) Commission _________________________ NET to HUD

Calculating Net to HUD Winning Bids are determined by the highest net to HUD Line 5: Closing Cost HUD will pay up to 3% of the purchase price toward closing cost Will only allow actual closing cost to paid on the HUD-1 Cannot be used toward third party settlement fees Entered as a numeric figure (not a percentage) Line 6: Commission 6a: HUD will pay up to 3% of the purchase price to selling agent as a commission 6b: will populate 3% for the listing broker Minimum Commission of $1,000.00

Does not change Net to HUD Broker Bonuses Repair Escrows

Repair Escrow (IE) Listing Information will show FHA Financing as IE (Insured Escrow) Look to the Property Condition Report (PCR) for Items Repair Escrow Property

Repair Escrows The sales price remains the same, the escrow amount is added to the mortgage. The Lender holds the escrow and is responsible for the repairs and licensed contractor. The listing will itemize the required repairs and the total cost. 110% of the stated repair amount will be added to the mortgage. NO REPAIRS PRIOR TO CLOSING !!!

The Bidding Process It is an online bidding process Agents must submit on behalf of buyers Bids are accepted 24/7 but are not reviewed on weekends and holidays. Bids received on the same day are considered to be received simultaneously. Bids received on Friday, Saturday and Sunday are considered to be received simultaneously Two acceptable bids in the same amount are selected by a randomized electronic drawing Daily Bid Deadline is 11:59pm Bids you wish to withdraw must be done by this deadline

Appraised Value Buyer must obtain their own appraisal, HUD no longer provides appraisals to Buyers or Lender The Repair Escrow is determined by the Buyer s appraisal. If the appraisal is lower than the bid price than the Buyer must bring the additional cash to closing

Earnest Money Must be Certified Funds < $49,999 --- $ 500.00 EM $50,000 - $249,000.00 --- $1,000.00 EM > $250,000 --- $2,000.00 EM Vacant Lot --- 50% of List Price EM is made payable to the Closing Agent and remitted to the Listing Agent

Earnest Money Once the contract is ratified (the executed contract has been sent to the parties) then the Listing Broker will remit the EM to the Buyer s Designated Closing Agent (BSCA) with 2 days. Review the Forfeiture and Extension Policy EM may be entirely or partially forfeited if the contract fails to close.

Forfeiture of Earnest Money Policy The failure by a Purchaser to close on the sale of property with the allowable time period, including any extensions granted by HUD, will result in the forfeiture of the earnest money deposit, except where special circumstances exist AND are documented and accepted by HUD

Forfeiture of Earnest Money Investors Uninsured Financed Sales 100% is Forfeited, regardless of reason Exception HUD cancels the contract for inability to close for any reason

Forfeiture of Earnest Money Owner Occupant Death in the immediate family Recent serious illness in the immediate family affecting the purchaser s financial ability to close Loss of job by primary breadwinner (no fault of purchaser) Other good cause, as determined and approved by HUD On Insured Sale, HUD or DE underwriter determines purchaser is no an acceptable borrower

Forfeiture of Earnest Money Owner Occupant - Uninsured Pre-Approved vs. Pre-Qualified Pre-Approved means a commitment has been obtained by a recognized mortgage lender for financing in a specific dollar amount sufficient to purchase the property If PRE-APPROVED 100% if unable to obtain mortgage financing otherwise 50% forfeited and 50% refunded

Canceling a Contract Don t let a contract cancel on expiration Complete the extension form at https://rainecompany.com/extension Include documentation with the Earnest Money Disposition Request Form

Closing Timeline Cash - 30 days from Date of Acceptance Financing (Except 203k) - 45 days from Date of Acceptance 203k Financing - 60 days from Date of Acceptance

Extensions Done in 15 day increments all 15 days must be paid If the contract closes prior to the 15 days the remaining per day fee will be credited back the buyer on the HUD-1 The Fee and Request Form must be submitted 5 days prior to expiration of the contract Sales Price Per Day Fee Extension Fee Submitted $150.00 $225.00 $375.00 $1 - $25,000 $25,001 - $50,000 $50,001 + $10.00 $15.00 $25.00

Home Inspections Highly recommended Done during the 15 day Due Diligence Period Must contact the FSM prior to the home inspection Must have a fully executed contract 48 hours once the utilities have been turned on Utilities must be turned off after the inspection Links to FSM activation pages can be found at https://rainecompany.com/resources Selling Agent Must Accompany Buyer and inspectors

Termite Letters Buyer can have done at anytime at their own cost Buyer responsible for all cost, including treatment and repairs HUD will only pay for letter, treatment and repairs if: a) FHA Financing b) State/Zone Mandated

Vandalism To determine option on moving forward or cancelling Postponing and extensions

Closing Protocol Closing Documents must be to the closing agent 7 days (5 business days) prior to closing A Ready to Close inspection must be completed CD/HUD-1 must be approved by the Lender, if applicable CD/HUD-1 must be approved by the Asset Manager Keys are not provided at closing

After Closing Coordinate with the Listing Broker for Buyer s access to the Property The Property must be re-keyed at Buyer s expense The utilities can be permanently activated

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The HUD Sales Contract Package Electronic HUD-9548 Sales Contract / Condition of Sale Note that the Sales Contract for a HUD Sale is a unique contract, different from customary contracts in the state Electronic filing of HUD-9548 contract addendum Owner-Occupant Certification (if applicable) For Your Protection: Get a Home Inspection Radon Gas and Mold Notice Lender Letter of Commitment / Pre-Qualification Letter Forfeiture & Extension Policy (Addendum A, Rev. 6/15/2009) Lead-Based Paint Addendum (if applicable) Flood Zone Addendum (if applicable) Notice to Purchaser Addendum (if applicable) Earnest Money Check with the Earnest Money Certification Form

Please ensure all items on the Bid Checklist are uploaded and the Earnest Money is submitted to the Listing Broker timely! The Contract cannot be initiated until all Bid Checklist items have been submitted. This includes BSCA E&O and license information.

Submitting the Contract for a Winning Bid Proof of Funds or Lender Letter, Corporate Documents (if applicable) and a copy of the Earnest Money Check must be uploaded within 24 Hours. The contract must be signed by Selling Agent, All Purchasers and the BSCA The AM will sign and send notification of the fully executed contract The AM s execution date becomes the official Acceptance Date

Contract Corrections One (1) business day to return a contract returned for corrections The contract will be canceled or awarded to the next highest bidder if all Bid Checklist items are not uploaded timely

Contract Addendums Adding/Removing a Purchaser Changing Financing Contract Corrections: Name, Address, Changing closing agents Complete Amendments forms at https://rainecompany.com/amendment

Financing Amendment From FHA to Other May cost the Buyer Money Cost of LBP and termite is now absorbed by the buyer Termite letters average around $100 LBP average around $700 Additional cost if there is treatment or abatement

Financing Amendment From Other to FHA Additional Time May be Needed LBP and termite must be ordered Termite: 5-7 business days for inspection, additional time if treatment is necessary LBP: 7-10 business days for inspection, additional time if abatement is necessary