by Charles MooreThese deals are difficult to come by and most people, not even real estate professionals know much about how the program works. I was one of those people until I seriously started researching it about a year ago and successfully closed my first GNND loan a few weeks ago. This article will shed some light on the process so that more buyers can take advantage of the program.
As mentioned, the program allows a qualified buyer to receive a HUD home at 50% off the list price. For Colorado properties the only place to find the available GNND properties is www.mcbreo.com. This is the law firm that manages all the HUD homes for Colorado and about 7 other states.
To access the properties, click on the Colorado link on the right and then the GNND listings are found at the bottom right under another link. The listings come out every Friday morning, and the buyer must submit their “Intent To Purchase” a property by midnight the following Tuesday. The potential buyer is issued a lottery number, and the winning lottery numbers are posted the following Wednesday afternoon. There is no negotiating over the sales price.
The “Intent To Purchase” must be submitted by a HUD approved real estate agent. It is advised to discuss the commission with your agent before a winning lottery number is issued. Unlike the majority of real estate transactions, the seller (HUD) does not pay the commission, so the buyer has to pay it. The commission can be rolled into the mortgage, so it is not an out of pocket expense for the buyer.
The mortgage is simple. If a person buys one of these homes for $100,000, the mortgage is $50,000 plus all closing costs. The real estate agent’s commission is added on top of the mortgage, minus your down payment of $100. In this case HUD would provide a silent second mortgage (no payments/no interest) for the remaining $50k. After the buyer lives in the home as their primary residence for three years, the silent second mortgage is forgiven. There is no appreciation or price cap on what the home can be sold for after this point.
Another aspect of the mortgage is that the buyer can take advantage of the FHA 203k rehabilitation loan if the property is in need of repairs. Since the homes are foreclosures, it is common that the buyer will likely want to fix it up a bit. This loan allows up to $35,000 to be added on to the mortgage for repairs and improvements.
I hope you have found this article informative and exciting. Feel free to contact me below with any questions. I can help with the mortgage financing and put you in touch with a great real estate agent who will not over charge. Thanks for reading and happy home hunting!
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