Donald Ray & Assoc.


For Buyers

What is a HUD Home?

When someone with a HUD insured mortgage can't meet the payments, the lender forecloses on the home; HUD pays the lender what is owed; and HUD takes ownership of the home. HUD then sells the home at market value through a Marketing & Management Contractor such as PEMCO.

What is a Listing Broker?

The M&M Contractor has engaged Listing Brokers to list the properties in the local Listing Services (MLS). They are paid a fee by the M&M Contractor. The Listing Broker provides assistance to realtors with access to the property and with sales information.

Who can buy a HUD home?

Anyone who can qualify for a mortgage or who can pay cash may buy a HUD home. Owner occupants must live in the house as their primary residence for at least one year and may not purchase another HUD home as an Owner Occupant for two years. Buyers must use a broker or agent who is registered with HUD to place a bid on a property.

How can I buy a HUD home?

Start by finding a participating real estate agent. Your real estate agent must submit your bid for you. Normally, HUD Homes are sold in an "Offer Period." At the end of the Offer Period, all offers are opened and considered to be received simultaneously, and, basically, the highest acceptable net bid is accepted. If the home isn't sold in the initial Offer Period, you can submit a bid until the home is sold. Bids can be submitted any day of the week, including weekends and holidays. They will be opened the next business day. The results from the review of all accepted bids are posted on our website. It is the responsibility of the real estate agent to check our website for accepted bid information and ensure that all the required forms are properly filled out and sent to us within two business days of acceptance.

How can I find a HUD home?

HUD homes are listed on our website and in the local MLS.

What is Owner Occupant Period?

When a HUD property is first listed for sale to the general public, bids can be submitted by all potential purchasers, however, it is available to Owner Occupant Purchasers "only" during the initial priority period as specified below. All bids placed by Owner Occupants that are submitted during this priority period are considered to have been received as though they were received simultaneously. If there are no acceptable owner-occupant bids on the last day of the priority period, then bidding becomes available to all purchasers on a daily basis, with no priority given to owner/occupant bids.
GEORGIA - 30-day Owner Occupant Priority Period
During the first 30 days a HUD property is listed to the general public, it is available to Owner Occupant Purchasers only. All bids placed by owner occupants that are submitted from day 1 through day 12 are opened on the 15th day and are considered as though they were received simultaneously. If there are no acceptable owner-occupant bids on the 15th day, then bidding becomes available to all purchasers on a daily basis, with no priority given to owner/occupant bids.

When can an Investor submit a Bid?

When a HUD property is first listed for sale to the general public, bids can be submitted by all potential purchasers (including investors), however, it is available to Owner Occupant Purchasers "only" during the initial priority period as specified above. All bids placed by Owner Occupants that are submitted during this priority period are considered to have been received as though they were received simultaneously. If there are no acceptable owner-occupant bids on the last day of the priority period, then bidding becomes available to all purchasers on a daily basis, with no priority given to owner/occupant bids.

Can I submit more than one bid for different properties?

If an Owner Occupant submits multiple bids for different properties PEMCO will select and award the bid that has the highest acceptable Net to HUD for that property.

Why do I have to get a Pre-Qualification Letter before I bid?

A Pre-Qualification Letter must be obtained prior to bidding on a property. This is to avoid having to tie up the property with a transaction that is unlikely to close. The Pre-Qualification letter must be directly from the lender (NOT the mortgage broker) giving a current date and an amount of the loan that is acceptable. It should also include the name the buyer(s) whose credit report was reviewed and approved by the lender.

How can I cancel my Bid?

If you are awarded a property either by Lottery or the General List, and you cannot complete the transaction, you will need to submit the Electronic Bid Cancellation form printed on your Broker's letterhead.

What is FHA financing?

There are three main types of FHA Financing. More information may be obtained from any mortgage company familiar with FHA Guidelines for the various programs.

(1) 203(b) Regular FHA Loan - Listed as "IN"

• If the Property does not have any mandatory repairs FHA will insure the Loan hence the classification of "IN"

(2) 203((b) - Repair Escrow - Listed as "IE"

• When a property has less than $5000 in repairs to bring it up to Minimum Property Standards, FHA will insure the loan provided the repairs are completed by the Buyer or the Buyer's agent within 90 days from the date of Closing.
• It is a cost to the Buyer that the Buyer can finance and add the amount to the mortgage.
• The Lender monitors and keeps the funds in an escrow account for disbursement on completion of repairs to the Lender's satisfaction.

(3) 203(k) - Rehab Loan - Listed as "203K"

• When the property has more than $5000 in Minimum Property Standards repairs to be done.
• The Lender must obtain an Inspection report from an approved 203(k) consultant and a new appraisal.

How is the repair escrow amount determined?

The FHA appraiser lists the estimated cost of repairs needed to bring the property up to minimum FHA standards. This amount is then multiplied by 110% and this amount is listed as the repair escrow amount. Example: if repairs total 1,000.00 x 110% = 1,100.00. The Repair Escrow amount will be listed at $1,100.00.

How do I determine the mortgage amount when there is a repair escrow?

The DE Underwriter will determine the final 203(b) mortgage amount. The DE Underwriter will take into account the repair escrow amount to determine the FHA loan amount. The DE underwriter will determine this amount. Regardless of whether or not a repair escrow will be used in the purchase of a home, the lines on the Sales Contract that request the down payment amount and the secured mortgage amount should be filled in "TBD" (To Be Determined). The line associated with the length of the loan should also be filled in TBD. Please remember that the repair escrow amount needs to be filled in only if the buyer is using 203(b) repair escrow financing.

Will HUD pay for any closing costs and selling agent's commission?

HUD allows up to 5% Real Estate Commission. Although HUD may pay for these costs, keep in mind that the higher the closing cost and commission will reduce your Net to HUD and may affect your competitive bidding ratio. For more information, ask your real estate agent or the listing broker.
HUD will allow to be deducted from its proceeds, purchaser financing and closing costs that are considered to be reasonable and customary in the jurisdiction where the property is located. In no event may these costs exceed 3% of the property's gross purchase price. Please reference HUD Notice H2006-12 for additional information. Please refer to page 2 of your state/regional Forfeiture and Extension Policy for a list of the closing costs that will automatically be paid by HUD and other closing costs that may be paid by HUD.

How long do I have to close? What if I need more time?

Sales transactions shall close within the timeframe as specified on your state/regional Forfeiture and Extension Policy (Addendum A, Rev 11-13-06). Closing timeframes are: (California and Georgia=45 days*); (Hawaii, Guam, Northern Marianas=60 days). Properties may close in less than the timeframe specified. However, the amount of days specified above for your state/regional area MUST be entered on the HUD Sales Contract. If closing does not occur within the timeframe then extension fees will apply. The Broker must submit a written request for an extension regardless of the reason for the delay in closing. The Extension Request Form can be found in the forms section of this website and must be accompanied by the extension fee. PEMCO will grant extension requests on a case-by-case basis.

*With one exception, buyers will have 45 days to close escrow regardless of the type of financing they use to purchase the home. If a buyer purchases a home with 203(k) financing, the initial escrow period is extended to 60 days at no additional cost to the buyer.

What is Officer/Teacher Next Door?

One of HUD's Special Sales Program under the Good Neighbor Initiatives is the Officer Next Door/Teacher Next Door (OND/TND) program. The OND/TND Programs offers HUD-owned, single family homes that are located in HUD designated Revitalization Areas will be made available to Law Enforcement Officers and Teachers at a 50 percent discount of the last listed price. When a law enforcement officer or teacher chooses to use an FHA-insured mortgage the down payment is $100. When a governmental agency of nonprofit organization is the purchaser, HUD expects that the full discount will be passed on to the law enforcement officer or teacher. Officer Next Door/Teacher Next-Door program participants are required to own and use their property as their sole residence for at least three (3) years. Participants agree to execute a second mortgage and note which will be for the amount of the discount which HUD can call at a later date if the buyer fails to re-certify. During the entire term (3 years), the buyer may NOT own ANY residential real property other than the OND/TND home. Failure to comply with this (or any OND/TND) requirement may result in the remaining balance of the second mortgage becoming immediately due and payable. The officer or teacher must submit a contract bid of 100 percent of the listing price. Winning bidder will be chosen by lottery. The 50 percent discount will be applied at closing. Teachers must be employed in the school district that they purchase a home in under the Teacher Next Door Program. More information on this program can be found at

What is Firefighter - Emergency Medical Technician Next Door?

Effective November 1, 2005, HUD announced the eligibility of firefighters and emergency medical technicians to purchase HUD acquired homes located in HUD designated revitalization areas at a discount, in accordance with HUD's regulations for the Officer/Teacher Next Door (OND/TND) Sales Program. Inclusion in the OND/TND program is designed to help more firefighters and emergency responders become homeowners, and will further the goals of the OND/TND Sales Program to accelerate the revitalization of America's cities by promoting the integration of dedicated role models and mentors into the community. More information can be found at

Does HUD have special programs for Non-Profits and Local Government Agencies?

Another one of HUD's Special Sales Program under the Good Neighbor Initiatives is the Direct Sales to Non-Profit Organizations and Government Agencies. This special sales program under which approved non-profit organizations and government agencies may purchase properties at discounted prices for use in local housing or homeless programs. More information on this program can be found at

Is there anything else I should know about HUD Homes?

More information is available on HUD's website: Houses built before 1978 may have lead-based paint which can cause harm to your family; so be sure to read about this hazard and about what you would need to do to correct it.

If an investor or any buyer gets a property awarded but lender does not accept HUD’s appraisal, and their own value comes in lower in another appraisal, can HUD adjust price?

Absolutely not.

If an investor cancels escrow due to property financing because of value not being there, does he lose his deposit?

YES. Refer to Addendum A. The only guidelines that will allow an investor to get any portion of their earnest money back is if an investor is using FHA financing and the FHA underwriter determines that the investor is not an acceptable borrower, then 50% of the earnest money deposit will be refunded.
As you know, FHA’s loan products are not set up for investor use; so the potential for an investor to receive any portion of their earnest money back is remote.

What about if property was purchased under Owner Occupancy, will the same rules apply?

Answer – Yes, the same rules apply, but if you read Addendum A, you will find that this addendum has many more provisions when it comes to returning all or a portion of the earnest money deposit to an owner occupant buyer. If the underwriter determines that the value of the property has dropped below the purchase price, PEMCO could determine that the cancellation of escrow is based on “other good cause” and it is probable that 100% of the earnest money will be refunded.

If someone does not have a social security number is there any way for them to bid?


If someone has a social security number, but no legal residency can they buy?

I have been told that prospective buyers must be US citizens.

Does HUD accept special powers of attorney?


What if there is a lien on a property? Who pays for it?

All homes must have a “Clear Marketable Title” which means that a buyer must have a clear title. Most times when a county places a lien on a property, HUD pays the lien, providing it’s a straightforward lien such as unpaid utility/county bills.
If, however, PEMCO cannot get a clear marketable title, because, for instance, a garage was converted to an apartment with no permit. PEMCO may reconvert the apartment to a garage or sell “As Is” disclosing the lien.

Can buyer’s names be changed once a bid has been entered?

You may add or delete as many buyers’ names on the contract, as or presented on the electronic bid. At least one name from the electronic bid must remain on the contract throughout the close of escrow. The one exception to this rule is a spouse, however, you must submit proof with a marriage certificate. If there are multiple owners with questionable FICO scores, a buyer is better off adding extra names to the bid and removing them prior to submitting a contract.

Is there a “buyer’s remorse period?”

The two day window between bid acceptance and the delivery of the contract package is the only opportunity the buyer has to cancel bid without placing earnest money in jeopardy.

What if my offer price is higher than the appraised value?

FHA guidelines will limit the underwriter to insuring the loan for the lower of two values; the offer price or the appraised value (displayed as the As-Is Value). If your offer price is higher than the appraised value, the FHA underwriter will require that your buyer(s) cover the overbid amount with a cash deposit. The buyer(s) will not be allowed to build the overbid amount into an FHA loan.
HUD’s mortgagee letter 2000-27 will require that the FHA UW use the appraisal obtained by PEMCO. This mortgagee letter instructs the FHA UW NOT to obtain a new appraisal; nor can the FHA UW request that new comps be pulled and the PEMCO appraisal updated. If your offer price is higher than the appraised value and tentative acceptance is extended to you, the options available to you are:

1. Proceed with contract execution. PEMCO will require that the selling broker verify that the cash reserves are available to cover the overbid amount before we execute the contract.

2. Use cash or conventional financing. All of the guidelines outlined above apply to FHA financing only. A conventional lender will have their own set of guidelines not governed by HUD.

3. Cancel prior to contract execution. If there is an acceptable backup, we will award tentative acceptance to the backup offer. If there are no acceptable backup offers, the property will be relisted

Our Locations

Donald Ray & Assoc. 1010 N Tennessee Street Suite 114   Cartersville, GA  30120 770.386.9735