Today's Market
by Laura Olive
as printed in the Coloradoan on March 18, 2001

Where have all the HUD Homes gone?

In the late 1980's approximately 75% of all home loans made in the area were FHA-insured loans. The high interest rates and poor economy caused some people to lose their homes to foreclosure. After the process was completed, HUD became the owner of these homes. And there were many. HUD listings were printed in the local newspapers. Brokers showed the homes to buyers, and then drove to Denver to have their sealed bids opened every Tuesday morning.

Today FHA provides only 10% to 15% of local area financing. But, even in today's booming economy there are a few people who lose their homes through foreclosure.

Whether today or 15 years ago, if the loan being foreclosed upon is an FHA loan, then the mortgage lender files an insurance claim with HUD. HUD pays the mortgage lender the insured loan balance and title to the property is transferred to HUD. The mortgage insurance paid by the borrower on every FHA loan creates a pool of money from which HUD draws to pay the claims.

Today HUD has arranged with management and marketing contractors to begin the process of maintaining and selling the acquired properties according to HUD guidelines. In 26 states, including Colorado, the maintenance and marketing is handled by First Preston Foreclosure Specialists. All HUD homes are listed on the Internet at www.firstpreston.com. This website is full of information on the process, and provides all the current listings. This lists HUD acquired homes that are being prepared for the market, active on the market, and under contact. The Broker Handbook contains comprehensive information for real estate licensees and the public.

As real estate professionals, we have all gotten calls from people who spot a small sign in the window indicating it is a HUD home. Now you can go the First Preston web site to determine whether the home is on the market or being prepared for the market. Broad Listing Broker Kathy Mahaffey of RE/MAX First Associates South is responsible for listing HUD owned homes for sale in the appropriate multi-list system (MLS) in Colorado. She also can answer questions from agents and buyers wanting to know more about the process. Her phone number is 970-226-3990.

Any qualified buyer regardless of race, color, creed, sex, national origin, handicap, or familial status can buy a HUD owned home. Buyers must work with a registered HUD real estate broker to bid and the buyer must be pre-qualified for the loan they will need to purchase the home. The pre-qualification process must include a review of the buyer's credit report.

Bids on HUD homes are submitted to First Preston electronically. Using HUD guidelines and restrictions, First Preston "acknowledges the bid that presents the highest net offer to HUD." New listings are posted Thursday of each week. Price reductions are posted on Friday of each week. For the first 10 calendar days after a home is listed, only owner-occupant purchasers are considered. After the first 10 days, First Preston considers non-owner occupant bids. If the property still remains unsold, First Preston evaluates the pricing. If you are a successful bidder it will be posted on the Internet. Your broker will need to overnight your signed HUD Sales Contract, copy of a certified check or money order (for earnest money), and all the appropriate signed addenda to First Preston. A sampling of other bids received is also posted to give you an idea of how the bidding went.

Sales must close within 45 days. Extensions beyond this will require a fee and a written approval. Buyers have 15 days from the date of the seller signature on the Sales Contract to get the home inspected with the utilities on, all at the buyer's expense. Homes are sold "as is." HUD does not make repairs, however, under certain conditions, the buyer may cancel the sale. Earnest money may be returned to the purchaser if the guidelines are met and proper procedures followed.

In order to sell HUD homes, and be paid up to 5% in commission at closing, Brokers must have completed the appropriate HUD participation and information forms and receive a NAID (Name Address Identifier) number. This is not difficult, but the process may take a couple of weeks. Approved non-profit corporations can purchase these properties as well, and they do have some special benefits and discounts that a private party would not have.

For further information go to www.firstpreston.com or contact any HUD registered real estate broker's office.

Copyright Olive 2000