HUD Guidelines 24 CFR 206.125

If you are shopping for a foreclosed property in Minnesota... or the inventory is just so low you decided to include them in your search, you may come across properties that say they are being sold subject to HUD Guidelines 24 CFR 206.125 which pertains to Home Equity Conversion Mortgage or HECM (FHA Reverse Mortgages (HECMs) for Seniors).

HUD Guidelines 24 CFR 206.125 specifically addresses ACQUISITION AND SALE OF THE PROPERTY as follows: 

(g) Sale of the acquired property. (1) Upon acquisition of the property by foreclosure or deed in lieu of foreclosure, the mortgagee shall take possession of, preserve and repair the property and shall make diligent efforts to sell the property within six months from the date the mortgagee acquired the property. Repairs shall not exceed those required by local law and, in cases where the sale is made with a mortgage insured by the Secretary or guaranteed by the Secretary of Veterans Affairs, those necessary to meet the objectives of the property standards required for mortgages insured by the Secretary. No other repairs shall be made without the specific advance approval of the Secretary. The mortgagee shall sell the property for an amount not less than the appraised value (as provided under paragraph (b) of this section) unless written permission is obtained from the Secretary authorizing a sale at a lower price.
(2) Repairs shall not exceed those required by local law or the requirements of the Secretary of HUD or the Secretary of Veterans Affairs if the sale of the property is financed with a mortgage insured by the Secretary of HUD or guaranteed, insured or taken by the Secretary of Veterans Affairs.
(3) The mortgagee shall not enter into a contract for the preservation, repair or sale of the property with any officer, employee, owner of ten percent or more interest in the mortgagee or with any other person or organization having an identity of interest with the mortgagee or with any relative of such officer, employee, owner or person.

(This relates to Fannie Mae Reverse Mortgage foreclosure.)

Property is Being Sold Subject to HUD Guidelines 24 CFR 206.125

The listing notes may require you to review and sign forms that override some MN buyer protections and may require the property to be occupied by the purchaser for a period of time (you can't buy it as an investment property and immediately rent it). There will also likely be Fannie Mae and lender disclosures limiting who can buy the property.

To sum up, what you see is what you get, for the price it is listed for and not a penny less, and the seller will not pay for anything or fix anything and any arrangements you need to get your inspections done, including activating utilities are the buyer's responsibility. Buyer upfront cash out of pocket to purchase may be higher than a traditional private owner sale. 

Some agents will provide a bullet point list that looks like this: 

Property is Being Sold Subject to HUD Guidelines 24 CFR 206.125

• This property is a Fannie Mae Reverse Mortgage REO.
• The code above allows an heir to purchase the property at 95% of the listed price.

Other stipulations of this type of property include:

• Property cannot be sold below appraised value (LIST PRICE)
• No mediation
• No electronic signatures
• Properties sold in “AS IS” condition at time of closing
• PLEASE US BUYER’S LEGAL NAMES, WHAT IT SHOWS ON DRIVERS LICENSE If LLC, will need stamped articles of incorporation pages
  
• No utilities are on. Buyer can pay to have them on for inspection. Buyer will need to pay $100 in order for utilities to be activated for inspections, or Selling agent may turn on utilities at Buyer’s expense with written permission
• No agent transaction fees allowed on the HUD, regardless if the Buyer is paying

• No buyer closing costs paid by seller are allowed on the HUD
• Buyer pays HOA Doc & Transfer Fee

• Seller will pay Seller’s closing costs and provide buyer with $29.95 PDQ Hazard Report
• Any realty transfer taxes due will be the sole responsibility of the purchaser
• Seller will bring taxes and HOA current through closing
• 10% deposit on cash offers (Cashier’s Check) $1,000 minimum deposit on financed offers (Cashier’s Check)60 day MINIMUM escrow period. Could be longer if title is not clear. If we can close sooner, we will.Offers that Do Not meet these Guidelines will be REJECTED
• Homepath financing is NOT available on these properties

Final Thoughts on Properties Sold Subject to HUD Guidelines 24 CFR 206.125:

There is no negotiation here.

The property cannot and will not be Sold below the List Price. An appraisal is ordered for the property by the Foreclosure company and the appraisal establishes the List Price. The seller will not pay any money towards the Buyer’s Closing Cost (even if the purchase price is greater than the list price). The property is listed with the utilities Off and will not be turned on for any reason by the Foreclosure company. Utilities can be turned on for inspection purposes by the Buyer or the Buyer’s Agent at the Buyer’s expense. The property is sold “As Is” and No Repairs will be made by the seller. 

Need help purchasing one of these propertied in Minnesota? Contact Sarah Marrinan.