With the creation of the Buyer Select Closing Agent Program in 2013, the Department of Housing and Urban Development (HUD) modified the requirements for purchasing a HUD-owned property. (A HUD-owned home is one that has been acquired by HUD after a foreclosure on an FHA loan, and put up for sale in order to recover the foreclosure loss.)
Before 2013, a specific closing agent was designated by HUD. In an effort to streamline the closing process, the Buyer Select Closing Agent Program now requires the purchaser to select a closing agent who will perform all the services involved in processing and closing a HUD property.
Under Buyer Select, all responsibility for home-closing functions is transferred from HUD to the selected agent or HUD-approved real estate attorney.
Regardless of whom the purchaser chooses, the closing agent must meet the following requirements:
- Must be approved by HUD to complete the transaction
- Must strictly follow all HUD timelines and closing requirements
- Must clearly understand state law and the intricacies of a HUD transaction
- Must correctly file all paperwork; mistakes may result in lost time, money, and/or contract
Selling agents must explain to purchasers that if their bid does not include closing costs, they will be responsible for the closing agent fee, and that all earnest money checks must be certified (Cashier’s check or U.S. Postal Money Order) and payable to the selected closing agent.
Closing agents must be covered by Errors and Omissions insurance in the amount of at least $1,000,000. Failure to adhere to all HUD requirements will result in sanctions including, but not limited to, financial penalties and/or being barred from closing on HUD properties.
In general, HUD homes can be a good deal for buyers, and the basic buying process has not changed. Assuming the selected closing agent has a proven track record and a high level of HUD expertise, closing under the Buyer Select Closing Agent Program should be fairly routine.
Barbara Pronin is an award-winning writer based in Orange County, Calif. A former news editor with more than 30 years of experience in journalism and corporate communications, she has specialized in real estate topics for over a decade.Published with permission from RISMedia.