Below, Lautzenheiser & Associates, discusses and provides helpful information to potential buyers of a HUD home.
We encourage all potential buyers looking at a foreclosure, to read this information.
Here's the inside scoop from a Field Service expert experience. We hope it helps!
1) OFFER PLACED ON HUD HOME
2) OFFER ACCEPTED / PRELIMINARY SALES CONTRACT AND HUD-1 DRAWN
3) OUTSTANDING ITEMS ON HUD-1 ADDRESSED
4) PRELIMINARY SALES CONTRACT PROVIDED TO FIELD SERVICE MANAGER WITH FORM FOR UTILITY INSPECTIONS / APPRAISAL
5) UTILITY INSPECTIONS / APPRAISAL COMPLETED
6) FINAL SALES CONTRACT AND FINAL HUD-1 DRAWN
7) CONTRACT EXECUTED
8) TITLE TRANSFERRED FROM HUD TO NEW OWNER (BUYER)
BUYER DO'S AND DON'TS WHEN PURCHASING A HUD HOME
WHAT YOU SHOULD DO!
1) KNOW WHO YOUR ASSET MANAGER AND FIELD SERVICE MANAGER ARE!
When purchasing a foreclosure, each property has an Asset Manager and a Field Service Manager assigned to it. The Asset Manager information will be provided to you by the listing agent for the property. The Field Service Manager information will be provided to you by the Asset Manager. When the Asset Manager provides you with a sales contract it will list the Field Service Manager on there.
2) READ ALL DOCUMENTS THOROUGHLY AND IN A TIMELY FASHION!
Purchasing a home is a very detailed process, when dealing with a foreclosure, this is often the case as well. It is imperative that a buyer ensure they thoroughly read all documents presented to them at the time they are presented, as most often there are time sensitive materials included. Oftentimes, HUD runs on a tight deadline and provide a window of opportunity for a buyer to complete certain necessary items in that specific time frame. If you are not doing this, you may lose the HUD home.
WHAT YOU SHOULD NOT DO!
1) DO NOT WAIT TO COMPLETE ALL NECESSARY TASKS PRIOR TO PURCHASING YOUR HUD HOME!
As mentioned in what should you do, you should not wait to complete any necessary items prior to your scheduled closing date on a HUD home. There are multiple items needed prior to purchasing a HUD home, such as utility inspections, appraisals, and walk-throughs, that need to be coordinated with key contacts, as mentioned below. This process can be timely, so it is our suggestion to move forward as soon as you receive all necessary information on these tasks, as time is key here! HUD only provides a buyer 15 days to complete all of these tasks.
IMPORTANT COMPANIES / PEOPLE TO KNOW!
Who is an Asset Manager?
An Asset Manager is a person assigned by the Asset Management company to work directly with the listing agent to sell you the foreclosed home. They will verify with the Field Service Manager that all outstanding bills are paid on the property, coordinate with the Field Service Manager and listing agent to complete the utility inspections and appraisals, and execute your sales contract in coordination with the your listing agent.
Who is a Field Service Manager?
A Field Service Manager is a company assigned to preserve the physical aspects of the property by preforming the following: cleaning, trash removal, securing of the property, boarding, replacing lock systems, maintenance of exterior grounds (if not covered by homeowner association), and any other maintenance that may come up while the property is under the bank's care. A Field Service Manager is also responsible for the financial aspects of the property.
The Field Service Manager, upon receiving the property from the bank, will contact utility companies, cities, counties, and homeowner associations (if applicable) to obtain a copy of any outstanding bills that may result in a lien on the property. The Field Service Manager must submit payment for any outstanding lien-able bills prior to the property being sold to a new buyer. This is normally referred to as "clearing the title" of a property.
IMPORTANT TERMS TO KNOW!
An appraisal is required on all properties, including HUD homes. This is a simple process but it must be completed prior to purchasing a HUD home. An appraiser will walk through and assess the property condition and put a numeric value on the property. Some appraisers do require utilities be activated on a property. This is often the case with HUD homes, as the condition of the utilities may be of lesser quality in a foreclosure. If this is the case, we suggest coordinating the appraisal with the Utility Inspections, as the Field Service Manager may only approve a buyer to activate the utilities on a property one time for a 72 hour period.
It is important to understand the utility inspection/activation process. A buyer MUST obtain approval from the Field Service Manager PRIOR to activating utilities on a HUD home for inspection purposes. If any utility is activated without Field Service Manager approval, any damages that may occur, are the sole responsibility of the buyer. Per HUD guidelines, the Field Service Manager has 72 hours to process a request for utility activations. The Field Service Manager will review all inspections made on the HUD home during the length of their acquisition and determine if the utilities may be turned on.
If the Field Service Manager denies any utility to be turned on, you MUST listen to that decision. You should ask for an explanation if one is not provided to you. Usually a utility will only be denied activation if there is an issue such as bad or missing plumbing for water, or faulty or split wiring for electric, etc. As a buyer, you are entitled to and should, at this point, be made aware of this information and understand this is why the utility cannot be activated. All Field Service Managers have a HUD form to complete requesting utilities to be activated for inspection. This form MUST be completed by both the buyer and the broker attending the inspection. Utilities are only activated for a 72 hours period and it is the responsibility of the buyer to coordinate with the utility companies to turn the utilities on, once approved. The Field Service Manager will approve a specific 72 hour window, but the buyer must coordinate themselves with the utility companies to activate during that window.
The preliminary HUD-1 is a document generally provided with the preliminary sales contract. This document will contain all of the property information including purchase price and buyer information, it will also include any outstanding bills on the property at the time the preliminary HUD-1 was drawn up. It is the responsibility of the Field Service Manager to remit payment for any outstanding bills on a HUD home. It is the Asset Manager's responsibility to communicate the outstanding items on the preliminary HUD-1. If these items are not address before the final HUD-1 is drawn up, it could delay closing.
The final HUD-1 is a document generally provided with the final sales contract, this will include the same information as the preliminary HUD-1, only all outstanding items should be removed by this point. The final HUD-1 is also accompanied by copies of outstanding invoices, required certification invoices, and copies of the checks made out to remit payment for those items.
And lastly always follow the advise of your Realtor for they have been trained in the process of HUD properties.
At Lautzenheiser & Associates, Inc we pride ourselves in having the vast knowledge behind the foreclosure business to successfully sell you a HUD home.