The United States Department of Housing and Urban Development (HUD) oversees the Federal Housing Administration (FHA), which provides federal insurance on home mortgages. If a homeowner fails to make payments on a FHA loan, the mortgagee forecloses and files an insurance claim with HUD. In exchange for paying off the unpaid loan balance to the mortgagee, HUD receives title to the property. At this point, the house becomes a HUD home.

After the mortgagee conveys the property to HUD, the Management and Marketing Contractor (M&M Contractor) begins the process of managing and marketing the homes according to HUD guidelines. The M&M Contractor is Southwest Alliance.

There are a few things you need to know up front about buying a HUD home, since the procedures may be different than those used in buying other types of homes. HUD however, has made the procedure as efficient and convenient as possible. Here are some things you should know:

• Anyone can buy a HUD home
  HUD homes can be purchased by anyone. While many homes are affordable, this is not a low-income program. Home may be bought by owner-occupants (who have a priority bid period for 10 days), and by investors, who can then bid along with owner occupants.
  
• HUD homes are sold at market value
  HUD homes are initially priced for sale at the appraised market value. The buyer may offer any price, but HUD will only agree to offers that provide an acceptable return. Price reductions may take place later if the home does not sell.
• HUD homes are sold "As Is"
  It is extremely important to understand that HUD homes are sold in "as is" condition. This means that the condition of the home when you see it is what you will be buying. HUD makes no warranties, does not guarantee the condition of any home, and does not verify that it complies with any local code or zoning requirements. You must make any necessary repairs after the purchase. HUD may make, or give you an allowance for, major system or safety repairs only if you are purchasing with an FHA-insured loan. It is very important that you get a Home Inspection by a licensed professional prior to closing on the sale.
• Deadlines must be met
  When you buy another type of home, you can usually negotiate the contract and other transaction items over an unspecified period of time. When purchasing a HUD home, this is not possible. In order to be fair to all purchasers, HUD has imposed timetables that must be met or your bid or contract will be cancelled and the home returned to the market. Once your bid is acknowledged as the highest net to HUD, for example, your agent must send in a correct contract within 48 hours or the bid will be cancelled. Generally, closing must take place within 30-60 days. Southwest Alliance cannot change the HUD deadlines.

• Offers must be made through a HUD registered broker
  If you want to make an offer on a HUD home, you must bid through a HUD-registered broker. For a list of local approved agents, click on your state and then click on Agent Locator.
• How to find a HUD home
  You should contact a broker as instructed above. These brokers will have a list of HUD homes from the MLS, which contains detailed information on the home. You can also look at available listings for your area here on this site under www.c21bowman.com, under HUD Properties. Check with your broker for more information about the house. You may also see a HUD or Southwest Alliance sign on a home; these are placed on homes after the initial inspection and mean that the home is being readied for sale. To find out if the home is actually for sale, consult the MLS or the Internet listings.
• Offers must be submitted through an electronic bidding process
  All offers must be submitted by your broker through an electronic bidding process. All offers are made via computer through the Internet. The electronic bids are stored in the computer system and, at the appropriate time, calculations are automatically performed to determine the apparent highest net offer to HUD.
• The apparent highest bid is acknowledged by Southwest Alliance to your broker, who is notified to send in a correct, signed sales contract within 48 hours. If the contract is not received within 48 hours or is incorrect, the home will be returned to the market or acknowledged to the next highest bidder. All acknowledged bids are subject to cancellation for prior sale, electronic error, and other conditions (see Disclaimers). An acknowledged bid does not constitute a sale; only a correct contract that is counter signed by Southwest Alliance and returned to your agent allows you to proceed to closing.
• Initial Listing Period
  The initial listing period, which is generally the first public listing for HUD homes, is 45 days. During this time, priority is given to owner-occupants who are buying the home as their primary residence. Priority is given for the first ten calendar days as follows: All owner occupant offers received during the first ten days of this initial period are considered to be received simultaneously. On the first business day after this period, these bids are reviewed to determine the highest acceptable offer to HUD.
  
  If there is no acceptable bid, bids are reviewed on a daily basis. Bids received at different times during the day will be considered received simultaneously, and the highest acceptable net bid will be acknowledged on the date opened. If the property remains unsold after ten days, it is made available to investors as well, and bids are reviewed on a daily basis. (Investor bids may be placed at any time but are not reviewed until the 11th day, if the property is still listed.)
  
  An owner-occupant purchaser is defined as a purchaser who intends to use the property as his or her principal residence; a State, governmental entity, tribe, or agency thereof; or a private nonprofit organization. Governmental entities include those with general governmental powers (e.g., a city or county), as well as those with limited or special powers (e.g., public housing agencies).
• Subsequent Listing Period
  When a property still remains unsold after the 45 day initial listing period, the M&M Contractor will re-analyze the case as soon as possible. The price may be reduced, and for five days after the price reduction, all bids are considered simultaneous, with owner-occupants given priority. After the five-day initial reduced price bidding period, then bids are reviewed daily and the acceptable bid that offers the highest net value to HUD (regardless of occupancy) is acknowledged.
• Contract must be submitted within 48 hours
  If your bid is acknowledged, your broker must submit a correct HUD Sales Contract, along with other required forms and Addendums signed by you, to the Southwest Alliance Regional office within 48 hours. You may be required to submit proof of financing commitment or cash to close, along with other items. You should be working with your broker to put the required items in place before you bid on a home, so that you are ready when the time comes.

• Closings are generally within 30-60 days and held at the closing agent office
  After your contract has been received correctly, it will be signed by Southwest Alliance on behalf of HUD and returned to your agent along with a contract acceptance letter. The letter will give you up to 60 days to close. Once you are ready to close, you and your agent must schedule the date with the closing agent indicated on the letter, who also receives a copy of your contract. Southwest Alliance does not set the closing date; it is up to you. If you use the HUD closing agent, HUD pays their fees. You may use your own agent, but then you must pay the fees. If you use your own closing agent, they must work with the HUD agent on some legal items.
• HUD will pay some closing and sales commission costs
  Generally, HUD will pay up to 5% of your broker commission cost. In addition, HUD will pay up to 3% for standard closing cost items (excluding the closing agent fee which is paid for separately). These items are designated by the buyer and may include discount points, loan fees, title costs, surveys, and other items. HUD will also generally pay any outstanding seller costs such as outstanding tax or utility bills which relate to HUD's ownership.
• Return of Earnest Money
  When you submit a contract, you must deposit earnest money with your agent (not Southwest Alliance), usually in an amount of $500 or $1,000. If you know your transaction will not close, your agent must notify Southwest Alliance as soon as possible so the home can be returned to the market. You may have to forfeit all or part of the earnest money if the sale does not close. If the sale is to an owner-occupant and does not close due to circumstances beyond their control, the money may be returned. Please review the earnest money policy for your area with your broker before you place a bid on a home.
• Extensions of time
  Extensions for time to close may be granted, in 15-day increments, under certain circumstances. Extensions may be granted at no cost to owner-occupants under certain circumstances that are beyond their control, such as a delay in financing approval that is not due to the buyer. Extension fees may be charged under other circumstances, and for investors. Extension requests must be submitted to the closing agent (not Southwest Alliance) in writing prior to the expiration of the original closing date, and accompanied by a non-refundable fee, in certified funds, if a fee is required. Contact your closing agent for more information on this process.

All HUD homes are sold by electonric bid. The M&M Contractor acknowledges the bid that presents the highest acceptable net offer to HUD, subject ot certain restrictions. Selling agents must create a Buyer Center account on the bidding site in order to be able to place an offer. This account is FREE and only takes a few moments to set up. Only licensed brokers/agents taht are registered with UGD and have an active NAID number may place an offer on behalf of their buyers.

To create a buyer center account:

From www.southwestalliance.com, click on View Property Listings which will take you to the home page of BidSelect™. Scroll down to the My Buyer Center section and click Join Now. Select the account type Selling Agent - FREE. Complete the required fields and press Continue. Once complete, your name will appear in the Find a Registered Broker/Agent section of BidSelect™.

Brokers may submit bids on homes as soon as they are listed as available on the Internet. Visit the web site at www.southwestalliance.com for current listings and other information. In most cases, a listing broker also lists properties in the MLS. The Listing Broker is a competitively selected subcontractor who provides specific local real estate services within assigned areas by county and/or state. The Listing Broker for your area is a source of assistance and information. The names and contact nformation are listed on Southwest Alliance of Asset Managers website in the Real Estate Professionals section. There is no set schedule for soliciting listing broker services in any area.

Before submitting a bid on the internet you must have the following:

A. Cashier check or money order made out the U.S. Dept. of HUD.

• $50,000 and below is $500.00
• $50,001 and above is $1000
  

B. Completed contract, signed and initial in blue ink.

C. Addendums packet list:

• Owner occupant (investor doesn't apply)
  
• Purchasers rights and responsibilities
  
• Home inspection (for your protection)
  
• Lead base paint, if built before 1978
  
• Forfeiture of earnest money policy
  
• Closing date extension policy
  
• Disclosure and release regarding mold addendum to sales contract
  
• Selling broker commission addendum
  

1. Go to www.southwestalliance.com
2. Click on Available Properties, select City, and then Address.
   
3. Click on Submit Bid. The next screen will ask for the HUD approved Tax I.D. number.
   
4. The next screen will be the electronic bid submission. Review the address and case number to make sure the bid you are submitting is on the correct property.
   
5. You are now ready to place your bid.
6. Fill in all requested information.
   
7. After completing bid information, click To Confirm.
8. Review all information. If correct click Confirm to submit.
9. Print a copy of the Confirmation Number to keep for your record
10. Click print contract.
11. Click for lead base paint built before 1978.

Once the winning broker bid is accepted, the Broker has 48 hours from time of posting on the internet to deliver the contract and all addendums to Southwest Alliance.

Deliver by Priority Mail. Do not deliver in person (only in an emergency)

Address to:
Southwest Alliance Management
Attn: HUD Contracts
5040 Addison Circle, Suite #300
Addison, TX, 75001
Phone: (972) 788-0026

Packet must include:

• Fully executed, signed and initial contract (all in blue ink)
  
• Copy of earnest money, cashier's check, or money order (do not send original cashier's check or money order).
  
• Pre-approval letter from Lender (original or legible fax copy) on lender letterhead, signed by Loan Officer. (Letter should state after reviewing buyers credit, the buyer is pre-approved for the bid amount).
  
• Information about brokerage service.

Southwest Alliance will e-mail approved signed copy of contract, termite report, and appraisal to broker, within 7 to 10 days. When contract is received, Selling Agent must forward cashiers check or money order to HUD designated Title Company by priority mail or in person, with request for earnest money receipt.

Escrow amount for repairs
The Buyer has to finance the repair amount and include it in the winning bid amount at closing and funding. The Lender retains that amount in their escrow account until repairs are completed. The Buyer must get an Invoice from their Contractor for the amount of the repairs made. The Buyer must approve the Contractor's work and release payment to the Contractor through the Lender.

No repairs can be done until after the closing and funding, i.e., if the Contractor's bid is estimated at $2400, and the repairs are $1800, the Lender will credit the Buyer in the amount of $600 toward their principal. If the Buyer chooses to do their own repairs, HUD will only allow for the Buyer to be reimbursed for materials, not their labor.