Here’s some information everyone should know about HUD-backed mortgages for short sales:
HUD requires a 6% commission on all short sales which is clearly defined on their website. They also spell out their guidelines for offers to pay off junior lien holders, which I think most people are unaware of. Freddie just changed their guidelines in the last thirty days, and I can point you in the direction of that literature as well. Here is the HUD info:
Do you own a HUD-FHA financed home, and need to do a Short Sale? Here is a summary of the requirements do perform an FHA-insured HUD Short Sale or “Pre-Foreclosure” Sale:
- You must be delinquent 31 days or more delinquent at the time of sale.
- You must list the property with an unrelated Licensed Real Estate Broker
You must actively market the property for four months (up to six).
For the first 30 days of marketing, the short sale lender (mortgagee) may only approve offers that will result in a minimum net sale proceeds of 88% of the “as-is” appraised Fair Market Value (FMV). During the next 30 days of marketing, the lender may only approve offers that will result in minimum net sale proceeds of 86% of the “as-is” appraised FMV. For the rest of the marketing time (60 days), the lender may only approve offers that will result in minimum net sale proceeds of 84% of the “as-is” appraised FMV.
- The property must be an owner-occupied, except for cases of job transfer, death, divorce, job loss
- There should be written proof of your decrease in income showing inability to pay the mortgage, job loss, etc.
- HUD will pay up to 1% of buyer’s mortgage as part of closing costs if the new mortgage is also FHA, plus reasonable “seller” costs
- HUD allows 6% Realtor commission
- HUD will not pay for Home Warranties, points or lender’s title insurance
- You must get approval to participate in the HUD Pre-Foreclosure Sale Program in advance
- Upon acceptance into the program, you will be given Approval To Participate Form which will outline program restrictions
Here are details of the HUD Short Sale (Pre-Foreclosure) Sale Program. Remember, these guidelines apply to FHA-insured loans only, and there may be some latitude in those requirements. These guidelines are subject to change.
For more information contact the HUD National Servicing Center, your lender, and an experienced Short Sale Specialist.
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