Buying a Foreclosure HUD Short Sale Home Cathy Baumbusch Instructor

Foreclosures/HUD/Short Sales Session One Welcome Objectives of this. Course Introduction – How Did We Get Here? Foreclosures What is a Foreclosure? The buying process – 3 Ways Financing HUD and Other Government-owned homes

Foreclosures/HUD/Short Sales Session Two Short Sales What is a Short Sale? What Sellers qualify for a Short Sale? The Short Sale “Package” Buying a Short Sale

Foreclosures/HUD/Short Sales Objectives of this Course Understand what causes foreclosure Types of foreclosure sales How to buy at a trustee sale How to buy a bank-owned foreclosure How to buy a HUD or other governmentowned foreclosure

Foreclosures/HUD/Short Sales Objectives of this Course (cont’d) Understand what is a short sale How to buy a short sale home Tax implications of a short sale How a short sale affects a seller’s credit

Foreclosures/HUD/Short Sales How Did We Get Here? Mid-1990 s to 2005 Rapid increase in home prices Supply in abundance Low interest rates Generous lending rules - ARMs Secondary market Investor demand for mortgage securities

Foreclosures/HUD/Short Sales Foreclosures What is a Foreclosure? Seller stops making payments Home will have to be sold Where to find foreclosure listings Newspaper – Trustee sales Web Banks Real Estate Brokerages

Foreclosures/HUD/Short Sales Foreclosures 3 Types Pre-foreclosure Trustee sale Bank- or REO-owned

Foreclosures/HUD/Short Sales Foreclosures Pre-foreclosure Borrower has stopped making payments Often Seller is “upside down” Foreclosure is imminent

Foreclosures/HUD/Short Sales Foreclosures Trustee sale Borrower has stopped making payments Bank has taken action Property is advertised for Sale Sold on “courthouse steps”

Foreclosures/HUD/Short Sales Foreclosures - Things to know about trustee sales Home is sold As-Is Deposit in certified funds is required Balance due in 14 -15 days Must close within 30 days Homes may be in bad shape Broker is not needed

Foreclosures/HUD/Short Sales Foreclosures Bank-owned REO – “Real Estate Owned (by lender)” Can also be owned by government agency such as FHA (HUD homes) or VA These homes are listed with brokerages and/or auction houses

Foreclosures/HUD/Short Sales Foreclosures (cont’d) Buying a bank-owned property Finding a property Making the offer Response time Counteroffers

Foreclosures/HUD/Short Sales Foreclosures – Things to know Negotiations done verbally Bank addendums – can be lengthy and favor lender Financing aspects of foreclosures Closing costs Termite and other inspections Homes sold As-Is Home Warranties Multiple offers

Foreclosures/HUD/Short Sales Foreclosures Auctions Brokerages have not been able to sell homes Homes put in auction pool Homes sold along with hundreds of others Certified funds deposit required Closing timelines Homes sold As-Is Buyers premiums average 5%

Foreclosures/HUD/Short Sales Foreclosures Auctions www. hudsonandmarshall. com www. ushomeauction. com www. williamsauction. com www. nicholsauction. com I am not affiliated with any of these companies, nor do I endorse any of them. This is for educational purposes only.

Buying a Foreclosure

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Foreclosures/HUD/Short Sales HUD Homes What is a HUD home? Owned by FHA Borrowers defaulted on FHA-secured loan www. hud. gov, click on HUD homes, Virginia OR http: //www. tenmanagement. com/listings/state. do? code=VA HUD homes are also in the MLS.

Foreclosures/HUD/Short Sales HUD Homes Search Properties for sale by City Price Reduced Properties for sale Handyman Specials. (New!) Search Properties for sale by County Search Properties for sale by Zip, Case # Get all Properties for sale in a sortable list Advanced Search

Foreclosures/HUD/Short Sales HUD Homes Types of HUD Sales Good Neighbor Next Door Dollar Homes Public sales

Foreclosures/HUD/Short Sales HUD Homes Bid Results Bid Statistics Help for Buyers Find a Broker How to Buy a HUD Home

Foreclosures/HUD/Short Sales HUD Homes How to Buy a HUD Home http: //www. hmbireo. com/index. php, click on Buyer Information, >>BUYER PROCESS<<

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process Anyone can buy a HUD home Owner-occupant have priority first 10 days Homes are sold at market value Homes are sold As-Is Deadlines are strict

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process Making an Officer Must use a registered HUD broker Electronic bidding Initial listing period Friday mornings Owner-occupants first 10 days

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process General public bidding after first 10 days Contract must be submitted within 48 hours of notice of offer acceptance Contract MUST be correct Closing must occur within 45 days

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process – Things to Know (cont’d) HUD may pay some closing and sales commission costs up to 5% commission up to 3% closing costs May use your own settlement agent or HUD agent If you use HUD’s settlement agent, HUD will pay their fees

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process – Things to Know (cont’d) n Downpayment and other costs n Owner Occupants Only: 3% Minimum Down payment for FHA financed properties. Maximum mortgage amount 97% of the appraised value or sales price whichever is lower. n Investors: 1 unit: 25% Minimum Down payment, for FHA financed properties; 2 to 4 units: 15% Minimum Down payment, for FHA financed properties.

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process – Things to Know (cont’d) n Required Earnest Money Amount: n $1, 000 for offers greater than $50, 000; (not to exceed $2000) n $500 for offers $50, 000 or less, n 50% of the Listing Price for Vacant Lots Other Costs n HUD generally will pay outstanding taxes and/or utilities

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process What happens if you can’t close? For owner-occup. 100% deposit returned if: Death or serious illness Loss of job Unable to obtain financing FHA loan – 100% Non-FHA loan – 100% If Non-FHA loan and borrower was pre-approved – 50% of deposit returned

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process What happens if you can’t close? (cont’d) Forfeit 100% of your deposit if: No documentation is submitted. Documentation fails to provide an acceptable cause for the buyer's failure to close. Documentation is not received by HMBI no later than close of business on the tenth (10 th) day following cancellation of the contract.

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process What happens if you can’t close? (cont’d) You can file a Request for Extension Fees associated (15 day periods) < $25, 000 - $10 per day $25, 001 – 50, 000 - $15 per day $50, 000+ - $25 per day No fee for owner-occup. for initial period if documentation shows reasonable effort

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process Listing codes n IN - Insured: All properties listed as "INSURED" are eligible for FHA financing. These properties are eligible for insurance under Section 203(b) of the National Housing Act. An interest rate will be charged on the loan and is negotiable between the purchaser and lender. The mortgage may include some mortgage insurance payments. The originating lender is responsible for making final determination whether a property meets Minimum Property Standards and, consequently, is eligible for FHA insurance.

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process Listing codes n IE - Insured with Escrow Repairs: Properties listed as "Insurable with Repair Escrow" are eligible for an FHA 203(b) insured loan. The lender making the new FHA 203(b) loan establishes an escrow for the amount of the repairs which includes a 10% contingency, not to exceed $5, 500. The identified repairs are required to meet FHA's "minimum property standard" (MPS) and the total repair costs should be equal to or less than $5, 000. If a 203(b) FHA insured loan is used for financing, the repair escrow must be used for the needed work specified in the listing. Repairs must be accomplished within 90 days of closing and be monitored by an FHA lender. The lender will inspect work as it is completed on the house and distribute the repair monies as appropriate within ninety (90) days of closing. The costs of repairs are included in the loan amount and repaid by the borrower as part of the monthly payment. Any funds in the escrow account not used for the repairs will be applied to reduce the unpaid principal balance of the loan. The escrow does not apply if the buyer is not utilizing FHA loan financing.

Foreclosures/HUD/Short Sales HUD Homes – Buyer Process Listing codes n UI - Uninsured: Properties listed as "UNINSURED" means that certain repairs and or improvements are required to be eligible for an FHA 203(k) mortgage. The required repairs on most of these properties exceed $5000. Purchasers of these properties have the option to purchase "as-is" with cash or conventional financing. These properties maybe eligible for a FHA 203(k) mortgage if the required repairs and or the improvements are completed in accordance with FHA guidelines. Ask a FHA lender for more details.

Session Two

Foreclosures/HUD/Short Sales Other Government-owned homes n From the Department of Veterans Affairs n VA homes are homes acquired by the VA due to foreclosure action on VA-secured loans. n Where they are listed: www. reotrans. com and the MLS. n You do not have to be a veteran to purchase a VA home. n VA financing is available for some properties n Making an offer on VA property is no different than any other home purchase, except that response times may be a little longer than traditional owner sale.

Foreclosures/HUD/Short Sales Other Government-owned homes n From Federal Deposit Insurance Corporation n FDIC properties are acquired by the FDIC as receivers of failed banking institutions. n Seller financing may be available. n Offers are considered using net funds received after deducting brokerage commissions and sale expenses, and payment terms considered in light of the applicant's credit worthiness and ability to perform.

Foreclosures/HUD/Short Sales Other Government-owned homes n From Internal Revenue Service http: //www. treas. gov/auctions/irs/cat_Real 7. htm n Under authority of Internal Revenue Code 6331, the property described here has been seized for nonpayment of internal revenue taxes. n All properties are sold by public auction. n All payments must be by cash, certified check, cashier's or treasurer's check or by a United States postal, bank, express, or telegraph money orde n There is no buyer’s premium at these sales. n Previous owners and other interested parties have the right to redeem the property within 180 days of the sale. n Bid winner is then paid the purchase price plus 20%. n Subject to encumbrances. Liens filed prior to the IRS Tax Lien remain with the property. Liens filed after the IRS Tax Lien go away once deed is issued.

Foreclosures/HUD/Short Sales Other Government-owned homes n n n From Customs - http: //www. treas. gov/auctions/treasury/rp/ Auctions of seized Real Property (real estate) for sale throughout the United States and Puerto Rico and includes homes, commercial buildings, vacant land, and multi-family residences. These properties have been seized through IRS-Criminal Investigation, Immigration and Customs Enforcement, and the U. S. Secret Service. All proceeds from the sale of property are deposited in the U. S. Treasury Asset Forfeiture Fund. Sale participants must register to bid during the specified registration time for the sale. Photo ID and the cashier's check deposit to register. Property is sold through open, progressive voice bidding.

Foreclosures/HUD/Short Sales Other Government-owned homes n From Customs – (cont’d) n All property is sold "as is. " n You do not need a broker to participate. n Typically, auctions are held "on-site" at the property location. n If you cannot attend the auction, you may submit a written bid by sending contact information or a completed written bid form , n Closing is usually required within 30 calendar days of sale or sooner. n These are cash sales. You do not pay a buyer's premium.

Foreclosures/HUD/Short Sales Other Government-owned homes n From the U. S. Marshals Service http: //www. usmarshals. gov/assets/sales. htm n The Marshals Service administers the Department of Justice's Asset Forfeiture Program by managing and disposing of properties seized and forfeited by federal law enforcement agencies and U. S. attorneys nationwide. The program has become a key part of the federal government's efforts to combat major criminal activities.

Foreclosures/HUD/Short Sales Other Government-owned homes n Fannie Mae – Home. Path http: //www. fanniemae. com/homepath/index. jhtml n Up to 100% Financing-With No Mortgage Insurance!* n Make sure you get the best possible home financing for your property! This program offers fixed rate mortgages with up to 100% financing and no mortgage insurance. No appraisal necessary on select properties. n Qualifications include: n One-unit, owner-occupied primary residences only n Minimum credit score-700 n First mortgages only-does not apply to second mortgages n Full documentation required

Foreclosures/HUD/Short Sales Other Government-owned homes n Freddie Mac – Home. Steps http: //www. homesteps. com/hm 01_1 findahome. htm Promotions: $400 coupon towards closing costs n Auctions n Hudson and Marshall n Realty. Bid. com n

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Foreclosures/HUD/Short Sales What is a Short Sale? What Sellers qualify for a Short Sale? The Short Sale “Package” Buying a Short Sale

Foreclosures/HUD/Short Sales What is a Short Sale? What Sellers qualify for a Short Sale? The Short Sale “Package” Buying a Short Sale