Getting Ready To Buy Indianapolis Real Estate

FAQs

• Are all HUD home commissions for the selling agent locked?

  HUD home commissions (sales fee) to the selling agent will auto populate on the sales contract at the rate offered by HUD. In general this rate will be 3%. The selling agent can always accept less for a HUD home commission (sales fee) payment. Remember that whatever amount you enter on your bid, the selling agent compensation will affect the net amount of the bid. Certain properties are designated hard to sell properties by HUD and these will have a base $1250 payment as the HUD home commission. This amount will auto populate on your bid. In general, “hard-to-sell” properties are homes listed for less than $42,000 or that contain other issues. There is not a specific written policy for when the $1250 will apply.

• Are cash offers considered more favorably than financed?

  Cash offers are normally looked upon more favorably than financed offers. Therefore, the corporate seller/bank normally frowns upon trying to change to financing. Corporate sellers will not allow mortgage companies or private lenders to be included on the HUD settlement statement if the accepted purchase offer stated cashterms. Cash as-is offers are not contingent upon having the funds available to close or the condition of the property. The buyer should be fully informed that (at a minimum) Earnest Money will be forfeited if they do not close the property. Selling institutions do not consider credit lines to be a form of cash. Credit lines are conventional loans.

• Can a buyer cancel if they find something wrong?

  The buyer has the right to cancel the contract and receive their deposit back if they do so within their contractual time frame (unless specifically noted). Inspections are encouraged on all homes.

• Can a buyer complete their own inspection?

  When buying a property, the buyer can inspect it as part of the purchase agreement, but the seller won’t handle or pay for these inspections. Please inform us 3 business days before you plan your inspection to ensure utilities like electricity are on, although we can’t guarantee things like gas will be activated. The listing agent isn’t responsible for any rescheduling or extra fees if utilities aren’t on. It’s wise to visit the property before the inspection to check the utilities. Remember, no pre-contract inspections are allowed; utilities won’t be activated or systems de-winterized until after a successful offer with an inspection contingency is made. Then, any issues found can be addressed under the agreed-upon conditions.

• Can a buyer get their earnest money back for major issues?

  HUD Homes are sold as-is and buyers need to be diligent when preparing their offers. When submitting a contract package, there is a Forfeiture Addendum document that the buyer will execute. This document spells out the terms of return of earnest money. These terms do vary from an owner-occupant purchaser to an investor. There is also condition that states earnest money could be returned for other good cause, as determined by HUD. Most of the questions on earnest money returns relate to an inspection and will fall under this condition. Buyers should be prepared that there is not an inspection contingency as would be the case with many other types of purchases. The buyer will be executing HUD’S Forfeiture and Return Policy stating they understand and accept its terms for addressing requests for earnest money returns.

• Can buyers without social security numbers bid on HUD homes?

  If a buyer does not have a Social Security number, they will need to have a Taxpayer Identification Number (TIN). These are commonly applied for and issued to non-US citizens who have business or personal interests in the United States that would require paying taxes. The Selling Agent will need to enter the TIN in the same format as a Social Security Number would appear (xxx-xx-xxxx). If they win the bid, the bidder will be required to provide a copy of the letter issued by the United States government assigning them the TIN with the rest of the contract package.

• Can I assign the purchase contract after it's accepted?

  No. Corporate sellers do not allow assignments of contracts.

• Can I get the appraisal or see the appraised value for a HUD home?

  No, unfortunately HUD will not make the stated appraisal available to Buyers or their agents.

• Can I submit a backup offer on a corporate-owned home?

  The corporate seller will have us hold any back up offer in situations where we are managing the bidding process (NOT HUD or Fannie Mae). If the accepted deal falls out, the seller may, or may not, ask for the back- up offers first. They often tell us to place the property back on the market and let all parties resubmit new offers. Unfortunately, if it is pending it means we have an accepted offer and the corporate seller is not requesting or considering any more offers. When we have posted a listing as Active- Back Up Offers the frequent question asked is: “Noticed you are taking Backup offers. Is there still time to get one in?” Back up offers status means the seller has accepted an offer and not all documents are executed. It is our way of trying to let you know the situation has not officially pended but that there is an accepted offer.

• Can I take possession before closing to make repairs?

  Due to liability risks, the Purchaser is not to take possession until the Seller has been funded (closing is final). No repairs are to be performed by the Purchaser prior to this time.

• How can the Fannie Mae Loan Quality Initiative affect home closings for buyers?

  Since June 1, 2020, the Fannie Mae Loan Quality Initiative has been impacting home closings. This initiative, which began in 2010, aims to ensure loans meet Fannie Mae’s guidelines by checking important loan details more thoroughly before and after the loan is finalized. It checks things like if the buyer really plans to live in the home, their social security number, and more. One new recommendation is for lenders to check the buyer’s credit right before closing. This is because new debts, like buying furniture on credit, could change the buyer’s financial status, possibly leading to a declined loan. For instance, a couple buying a home decided to finance new furniture, adding $7,500 in debt, which might risk their loan approval since it affects their debt-to-income ratio. It’s crucial for buyers to avoid taking on new credit before closing to ensure their loan goes through.

• Do I get a signed agreement if my offer is accepted?

  A common source of confusion on corporate-bank owned homes is what constitutes an actual contracted agreement. Corporate-bank owned properties will often provide a verbal acceptance until the seller’s specific purchase contract terms (in the form of an Addendum to the purchase contract) are executed by both the buyer and the seller. There are situations where the addendum is not executed and returned in a timely manner and the seller proceeds with accepting another offer. It is imperative that if you receive an acceptance that you execute the seller’s addendum and return it within the demanded time frames. Please understand that no offer is fully accepted until the seller signs the addendum package returned to them.

• Do I have to resubmit bids daily in the daily bidding cycle?

  HUD homes will be offered through HUDHomeStore.com in a bidding cycle that initially is a sealed bid period followed by a daily bidding cycle. If the buyer still wishes their bid to be considered, it will have to be resubmitted daily. Of course, the buyer may wish to consider making changes to their bid to make it more aggressive if their bids are coming back Cancelled the next day.

• Do I need proof of funds to make an offer?

  It is strongly recommended that your offer be submitted with a proof of funds or a preapproval letter. In fact, many corporate, and investor, sellers insist on receiving proof of funds with any offer. A proof of funds provides assurance to the seller that the proposed buyer has financial capacity to perform on their offer. Corporate sellers and traditional sellers will favor offers that specifically show the proposed buyer’s financial capacity to complete the purchase as proposed.

• Does the bank care about your offer?

  When you make an offer on a property owned by a bank or a corporate seller and don’t hear back quickly, don’t worry—they’re not ignoring you. Unlike regular home sales with quick responses, banks and corporate sellers take more time because multiple people review the offer, especially if it’s much lower than their expected price or if there are many offers. They analyze many factors, like appraisals or broker price opinions, to decide. Even if they don’t accept your offer, it still gives them valuable market insight. So, there’s no need to constantly contact the listing agent; they’re eager to sell and will inform you as soon as there’s an update.

• How can my client make an offer on a HUD home?

  As a selling agent, you must work under a Broker who has obtained (and annually renewed) a HUD Name Address Identifier (NAID). First ask your broker for their NAID as it will be required to enter your offer at HUDHomeStore.com. Confirm that your Broker has renewed their NAID in the last year. If you are a real estate primary broker and do not have a NAID, here is the link to the forms required and where to return them. Please be careful to include all the attachments required on page 2 of the SAMS 1111 under the column labeled SB. Please be advised it can take 3-4 weeks to obtain a new NAID number or to have a renewal activated if a year has passed. For this reason, WILMOTH Group offers a referral program to brokers who do not have a NAID number but do have a client wishing to make an offer on a HUD home.

• How do I get a FHA Amendatory Clause Form executed for HUD?

  This addendum is not required and will not be executed on HUD sales. HUD sales are exempt from this requirement due to the FHA appraisal completed prior to HUD placing the home on the market and the valuation it produces for an as-is listing price.