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U.S. Department of Housing and Urban Development

Office of
Housing

+-----------------------------+----------------------------------------+
| **Special Attention of:**   | **Notice H 00-7 (HUD)**                |
|                             |                                        |
| **All Homeownership Center  | **Issued: 4/28/00**                    |
| Directors**                 |                                        |
|                             | **Expires: 4/30/01**                   |
| **All REO Directors**       |                                        |
|                             | ****   |
| **All Real Estate Owned     |                                        |
| Branch Chiefs**             | **Cross References:**                  |
|                             |                                        |
| **All Management and        |                                        |
| Marketing Contractors**     |                                        |
+-----------------------------+----------------------------------------+



**Subject: Implementation of "\$1 Home Sales to Local Governments
Program"**

The Department is seeking means to expand its partnership with local
governments in helping to foster housing opportunities for low to
moderate income families and address specific community needs. One area
of opportunity is sales of single family real estate owned properties to
local governments. The following changes to HUD's policy for the sale of
these properties will be in effect on May 1, 2000:

-   **Special Offering of Aging Inventory Properties to Local
    Governments**

Properties which have been offered to the public for sale for six or
more months and are not presently under a sales contract will be removed
from the market and offered exclusively to local governments for \$1
plus closing costs. To be eligible to participate in this new sales
program, local governments may purchase properties within their
jurisdiction and must:

1.  identify the intended disposition strategy(ies) and clear public
    purpose goals and objectives it will pursue with properties
    purchased through this program;

2.  affirm that all profits from resales of these \$1 homes will go to
    support local housing/community development initiatives;

3.  identify what specific programs or uses these profits will support;
    and

4.  agree to provide HUD's Homeownership Center (HOC) Program Support
    Division Director with a report on June 1, 2000 and annually
    thereafter for all properties purchased under this program. The
    report must include information on the ultimate property purchaser,
    the amount of profit realized on the final sale and where the profit
    was used.

****

**HSIP Distribution:** W‑3‑1, W‑2(OGC)(H)(Z), W‑3(A)(H)(ZAOO), W‑4(H),
R‑1, R‑2, R‑3, R‑3‑1(H)(RC), R‑3‑2, R‑3‑3, R‑6, R‑6‑1, R‑6‑2, R‑7,
R‑7‑1, R‑7‑2, R‑8, R‑8‑1

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As part of its disposition strategy, the local government may indicate
that it intends to purchase the property and convey it to a nonprofit
organization for rehabilitation and resale to first time homebuyers, low
to moderate income buyers or some other public purpose objective. This
is an acceptable approach, however, local governments should be reminded
that all information pertaining to the purchase and subsequent resale
must be included in the annual report provided to HUD's Program Support
Division Director. Failure of a local government to comply with any of
the above requirements will result in their removal from participation
in this program.

Nonprofit organizations and entities such as housing authorities are not
permitted to directly purchase properties under this sales program.
However, should the local government identify an agency of government
such as a housing authority to act as its agent to purchase these
properties, this is acceptable and sales contracts may be accepted from
them.

Prior to offering properties to local governments, the M&M contractor
\[and/or HUD staff\] must ensure that the property has been listed for
sale for at least six months. In order to calculate the length of time a
property has been marketed, begin with the original listing date. Do not
include any period of time a property has been held off the market. The
total marketing time only includes days actually listed for sale. For
example, properties temporarily removed from the market when HUD enters
into a sales contract which are then relisted for sale due to the
purchaser's failure to close, the days the property was temporarily held
off the market ***[are not counted]{.underline}*** toward the 180 day
threshold. When the property is placed back on the market, the clock
will resume ticking towards meeting the six or more months of marketing
to qualify for this program.

On May 1, 2000, all M&M contractors must inform the local governments of
the start of this new program. A sample letter is attached that must be
used by the M&M contractors to complete the notification process. In
addition to the letters, the M&M contractors are encouraged to contact
all local governments via email. Local governments should be provided
with the appropriate website addresses that they can access to obtain
the listing of properties that are available for purchase under this new
program. As is done with the Officer Next Door and Teacher Next Door
listings, the M&M contractor must identify those properties eligible for
the "\$1 Home Sales to Local Governments" program on their website.
HUD's main website will also provide information on this program with
appropriate links to the M&M contractors' websites.

Properties must be made available to local governments on a weekly basis
with new properties being added as they reach at least six months of
marketing exposure. The properties must remain available exclusively for
purchase by local governments for 10 calendar days. A form HUD-9548,
Sales Contract, must be received within this period

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of time for consideration for the \$1 sale. If sales contracts are
received within this time period but contain minor errors requiring
correction, the M&M contractors must notify the local governments of the
required changes and allow five days for the submission of a corrected
sales contract.

An addendum to the sales contract must be completed by the local
government purchasing the property and submitted with the sales
contract. The attached addendum must identify the intended disposition
strategy of the property. As mentioned previously, the local government
purchasers will be required, on an annual basis, to identify to the HOC
Program Support Division Director the ultimate disposition of the
property and any specific benefits accrued to the community.

In those instances where a local government has assessed liens against
the properties and fines are assessed, the local government must remove
these liens at no cost to HUD in an effort to facilitate the sale. In
addition, the local governments will be required to absorb the closing
costs involved with each property sale transaction. HUD, however, will
continue to pay its closing agent's fee and any wire transfer expenses.

If local governments do not submit a sales contract within 10 calendar
days, single unit properties will then be offered exclusively to Officer
Next Door/Teacher Next Door participants for an additional 10 calendar
day period. If properties remain available for sale after this offering,
local governments may submit offers to purchase these aged properties
for \$1. *Consideration will only be given to these offers if no other
acceptable offers have been received from the public.* M&M contractors
are to ensure that their websites are properly maintained to ensure
accurate, up to date, information relative to property availability.

-   **Outreach efforts by HUD and M&M contractors**

Many local governments are unaware of the opportunities for purchase of
HUD-owned single family homes. HOC staff, in conjunction with local
Community Builders, and the M&M contractors must immediately begin
conducting outreach efforts to all local governments within their
jurisdiction. M&M contractors must complete the notification of this new
program to the local governments within one week from the date of this
Notice. HOC REO staff must ensure that the M&M contractors complete this
notification promptly.

-   **Demolition consideration.**

It should be noted that the local government may recommend the
demolition of any property which is currently available for purchase by
that entity. To consider demolition, the following criteria must be met:

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1.  HUD's last listed price, plus the cost of rehabilitating the
    property to meet HUD's Minimum Property Standards (MPS) is more than
    130 percent of the after rehabilitation value. The determination of
    rehabilitation cost and the after rehabilitation value may require
    the M&M contractor to procure the services of a structural engineer,
    appraiser, and/or special inspectors. The appraisal must include the
    fair market value of the land. The cost to procure the previously
    mentioned services will be treated as pass through expenses.

2.  The cost of demolition may not exceed the cost of rehabilitating the
    property to meet MPS.

3.  Review the Environmental Compliance Record to determine whether the
    property is listed on the National Register of Historic Places or
    located in a Historic District. If the property is classified as
    "historic", review any conditions on the disposition of the property
    to determine whether demolition is permitted. If so, follow any
    conditions imposed in conjunction with the demolition.

In the event that the M&M contractor and HUD are in agreement that the
above criteria have been satisfied, demolition of the property should be
completed by the M&M contractor. HUD will pay for the demolition and
clearing of the debris.

Following demolition, the land should be listed for sale to the general
public for 10 calendar days at its fair market value. The M&M
contractors are reminded that the sales commission for vacant lots is 10
percent with a minimum of \$200. Should no acceptable offers be received
from the general public, the land should be offered to the local
governments for \$1 for 10 calendar days. In the event the local
governments have no interest in the land, the property would be relisted
on the general listing until the property is sold.

-   **Offering to Officer Next Door/Teacher Next Door Participants**

If the local governments fail to submit a sales contract within the
timeframe identified above, the single unit properties should be
relisted for sale exclusively to Officer Next Door/Teacher Next Door
participants for a 10 calendar day period. During this time, the
property will not be offered to nonprofit organizations and units of
state and local governments. With the exception of multiple unit
properties, ***all*** properties will be made available for purchase to
these participants. Discount levels previously established for Officer
Next Door/Teacher Next Door apply. It is important to note here that the
discount received by the Officer Next Door/Teacher Next Door participant
will be based on the adjusted list price not the appraised value.

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-   **Best Offer Approach**

Should properties remain unsold after the offering of aging inventory to
Officer Next Door/Teacher Next Door Program participants, the property
should be relisted for sale to the general public.

-   **Restatement of As Is Policy**

HOC staff and the M&M contractors are reminded that properties are sold
"as is." The Department believes that an "as is" sale is the fairest,
most straight forward sales method. However, even though HUD sells its
properties "as is," it is HUD's policy, as a good neighbor, to keep the
properties in a safe, secure, and well-maintained manner. Specifically,
HOC staff must ensure that as required by their contract, the M&M
contractors:

-   Routinely inspect and take all actions necessary to preserve,
    protect, and maintain each property in a presentable condition at
    all times.

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-   Secure the property to prevent unauthorized entry using a locking
    system determined to be acceptable to the GTR;

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-   Protect the property from damage from the elements, through such
    measures as repairing broken windows, patching roof leaks, and
    replacing functional shutters;

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-   Correct ANY condition that presents a health or safety hazard to the
    public or to the property within 24 hours of discovery. This would
    include repair of broken steps and/or floorboards, removal of
    hazardous material such as gasoline cans and/or oil-soaked rags, and
    removal of dead animals and/or feces.

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-   Remove and properly dispose of all interior and exterior debris
    immediately after property conveyance and on a continual basis;

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-   Maintain lawn, shrubbery and trees consistent with neighborhood
    standards, as well as prompt snow removal from private access and
    public walkways consistent with local ordinances;

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-   Winterize all operating systems and equipment, including but not
    limited to shutting water off to external spigots and filling
    internal water systems with antifreeze.

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-   Properly secure swimming pools, spas, etc, including draining the
    pools, covering pools, and protecting linings, as required by local
    ordinance;

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-   Correct factors which may cause deterioration of the property, for
    example, installing a sump pump to stop water from seeping into a
    basement.

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-   Maintain each property in such a way as to prevent any deterioration
    in condition or value to the property between the time that it is
    assigned the property and the time it conveys the property to a
    purchaser.

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-   Repair all damage due to vandalism.

The Department is excited about these new opportunities for expanding
partnerships with local governments. We will continue to expand current
programs, such as "Asset Control Area" agreements with state and local
governments and nonprofit organizations for the purchase of a
pre-defined flow of HUD's property acquisitions.

If you have any question regarding these new approaches, please contact
Wanda Sampedro of the Asset Management Division at (202) 708-1672.

**William Apgar**

**Assistant Secretary for Housing-**

**Federal Housing Commissioner**

**Attachments**

**(M&M contractor's letterhead)**

**Dear**

**SUBJECT: \$1 Home Sales to Local Governments Program**

**I am pleased to announce that effective May 1, 2000, the U.S.
Department of Housing and Urban Development (HUD) implemented its "\$1
Home Sales to Local Governments Program". This program allows local
governments to purchase properties which have been listed for sale for
more than six months for \$1. This will make it possible for communities
to rehabilitate homes and put them to good use at a considerable
savings.**

**Properties will be made available for sale under this new program on a
weekly basis. I invite you to visit our website at
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ for a complete
listing of properties currently available for purchase under this
program. In addition, you may also visit HUD's website at
http://www.hud.gov for information on this program.**

**If you have any questions, please do not hesitate to contact
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
at \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ (M&M contractor to insert
their phone number here).**

**Sincerely,**

**(M&M Contractor)**

**ADDENDUM TO SALES CONTRACT**

**\$1 Home Sales to Local Governments Program**

PROPERTY ADDRESS:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

FHA CASE NUMBER:
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

-   ***The proposed disposition strategy, goals and objective for
    purchasing this property are: (Purchaser may list a number of
    alternative strategies here.)***

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

-   ***By signing this addendum, I/We affirm that all profits from sales
    of HUD homes will go to support local housing/community development
    initiatives;***

-   ***The following local government programs will benefit from the
    proceeds in excess of the cost to rehabilitate the property received
    from purchasing and subsequently selling the property:***

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.

-   ***By signing this addendum, I/We agree to provide HUD's
    Homeownership Center (HOC) Program Support Staff Director with an
    annual report that provides the status and details on all properties
    purchased under this program. The report must include information on
    the ultimate purchaser, the amount of profit realized on the final
    sale and where the profit was put back into local housing/community
    development.***

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

***Signature of Purchaser and Date***