Housing and Urban Development
The United States Department of Housing and Urban Development (HUD) acquires thousands of homes every year through foreclosure of properties that had Federal Housing Administration (FHA) insured mortgages.
Local governments and FHA-approved non-profit organizations can purchase HUD homes located in pre-determined HUD Revitalization Areas, and they are usually offered this opportunity before these properties are listed to the public.
Once properties are listed to the public, there is an Exclusive Sales Period. This period gives first priority to owner occupant buyers, meaning those buyers who will use the property as their primary residence. After the Exclusive Sales Period, non-owner occupant investors can then bid on the properties.
The length of the Exclusive Sales Period is based on the insurability of the property, meaning whether the property would qualify for an FHA insured 203(b) loan. If the property is insurable "IN" or "IE", then the period will last 30 days and HUD will accept owner-occupant offers after the 15th day and investor offers after the 31st day. If the property is uninsurable "UN", then there is no waiting period and it is open to all buyers, owner-occupants or investors.
Please see chart below for further explanation of Exclusive Sales Period.
These properties can be purchased by:
- Any qualified buyer that has written proof of pre-qualification by a mortgage lender.
- Any qualified buyer who can provide proof of funds if purchasing with cash.
- Any HUD approved non-profit organization.
The Good Neighbor Next Door Initiative
The Good Neighbor Next Door (GNND) is a program for full-time law enforcement officers, pre-kindergarten through 12th grade teachers, firefighters/emergency medical technicians, qualified nonprofit organizations, and government entities allowing them to purchase HUD homes at a discount of 50 percent of the list price of the home. In return, these buyers must commit to live in the property for 36 months as their sole residence.
Buyers who wish to participate in the GNND program must submit their bid through a registered broker. The amount of the discount (50 percent of the sale price) becomes a silent second mortgage on the property. The home buyer does not need to make any payments on this note, nor is any interest accrued as long as the 36-month occupancy requirement is met. The silent second is reduced to zero at the end of the three-year period. Earlier move out may initiate substantial penalties. The home buyer must not have owned any other real estate for one year prior to participating in the GNND program. Nonprofits and government agencies must submit a housing plan to HUD prior to their approval to participate under the program. In the housing plan, non-profits, and government agencies must identify an area (either certain zip codes or census tracts in which they are interested). They are then restricted to purchases in those areas.
GNND and other special sales program properties are available for five days before they are placed for sale to the public.
In order to submit a bid on a HUD home you must use a broker who has been approved to sell HUD homes, such as StoneGate Realty.