4310.5 REV-2

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CHAPTER 10. SALES PROCEDURES

SECTION I - POLICY

10-1 Properties available for sale shall be publicly advertised for a

period of 10 days. Bid openings must be public and shall be

conducted on the first workday following expiration of the 10-day

period. The advertisement shall provide for an Extended Listing

Period and properties not sold will remain available until sold or

relisted under different terms.

SECTION II - INTERNAL CONTROL OBJECTIVES

10-2 The Chief Property Officer, or designee, reviews the files on all

properties sold where the selling price varies from the appraised

value.

10-3 Sales contracts are awarded to the acceptable highest net offeror
in

accordance with HUD program requirements.

10-4 Upon Receipt, all collections of funds related to sales activity,

including earnest money deposits, are promptly deposited and

appropriate documentation is maintained.

10-5 Confidentiality is exercised by offices using facsimile machines to

receive sales offers. Facsimile offers should be placed immediately

into envelopes and sealed. The Chief Property Officer should

designate an individual to control receipt of facsimile sales

offers.

10-6 Segregation of Duties. Within the Field Office, separation of

duties is maintained between the approval of sales contracts and the

collection of earnest money deposits.

SECTION III - SALES PROGRAMS

10-7 Insured Sales. Properties which in their present condition meet the

intent of the Minimum Property Standards (MPS) described in Handbook

4905.1, Requirements for Existing Housing, One to Four Family Living

Units. \"Intent\" is defined as: Based upon a visual inspection, the

property is structurally sound, free of roof leaks, and has

operational mechanical systems. Properties meeting the intent of

MPS shall be offered in their as is condition with mortgage

insurance available. The following applies to all types of insured

sales, including repairs with escrow.

A. Systems Tests. While it may be preferable to test the

mechanical systems beforehand, this will not always be possible

within the time frame for listing properties. In such cases,

inspections will be limited to a visual check with the ultimate

decision based upon the general overall condition of the

property.

B. Mortgage Amount. For an owner-occupant purchaser, the mortgage

amount is based on the bid price plus any allowable prepaids

(e.g., taxes) and/or financing and closing costs, less the

stipulated downpayment, up to the local maximum mortgage

amount. For investor purchasers, the mortgage amount is

limited to 75 percent of the bid price for one-unit properties,

and 85 percent for two to four-unit properties, up to local

maximum mortgage amounts. Prepaids, financing or closing costs

may not be included in the mortgage amount for investor

purchasers. Prior to acceptance of a sales contract, verify

that the mortgage amount stated in Item 4 (if an insured sale)

does not exceed the local maximum limit.

C. Downpayment.

1\. Owner Occupants. Downpayment requirements will normally

be consistent with the Section of the National Housing Act

under which the mortgage is to be

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10-1 5/94

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4310.5 REV-2

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insured. If determined to be necessary to stimulate

sales, the downpayment may be established at three percent

of the bid amount. Where further reductions below three

percent are essential to sales of properties, the

downpayment may be reduced, for temporary periods, to as

low as \$100 as long as the Headquarters limitation is not

exceeded. (See paragraph 6-22 A. for the definition of

hard-to-sell properties.)

a\. Factors to consider in reducing downpayment

requirements include competition in an area from

other private or governmental sales, a concentration

of HUD-owned properties in an area with a turnover

rate which is greater than two months above the

average for the Field Office, lack of acceptable bid

offers after reasonable market exposure, and other

reasons determined by the Field Office to be relevant

in order to market the property successfully.

b\. To qualify for a downpayment of less than three

percent of the bid amount, the gross offering price

must equal or exceed the listing price; the sales

commission cannot exceed six percent; and the

combined sales commission and the requested

financing/closing costs (Line 5 of the Sales

Contract) cannot exceed the limit(s) established by

the Field Office. (See paragraph 6-22 C.3 for

Financing and Loan Closing Expenses.)

Under no circumstances shall a Field Office define

its entire jurisdiction as \"hard-to-sell\", thus

permitting downpayments below three percent for each

of its insured properties. Further, reduced

downpayments shall be for temporary periods rather

than permanent use.

Field Offices must continually monitor the impact of

lower downpayments on sales results.

Regional Offices must monitor the use of lower

downpayments by their respective Field Offices to

ensure that the insured sales offerings that are

available for sale with a downpayment of less than

three percent do not exceed any Headquarters\'

limitations.

NOTE: Property Disposition sales are exempt from the

normal FHA requirements regarding downpayments and

calculation of maximum mortgage amounts.

2\. Investors. The amount required for one unit is 25 percent

of the bid amount; for two-to-four units, 15 percent of

the bid amount.

3\. 203(k) Sales. Downpayments to owner-occupant purchasers,

whether standard or reduced, are based on the contract

sales price. No further downpayment is required on the

rehabilitation costs of the mortgage. Investors that

purchase properties with a 203(k) insured loan are

required to have a minimum 15 percent downpayment.

10-8 Insured Sales with Repair Escrow. Properties which need less than

\$5,000 worth of repairs to meet the intent of the MPS will be

offered for sale with insured financing available, provided a cash

escrow is established to ensure the completion of repairs.

A. Repair Escrow. Properties requiring repairs within the

guidelines listed below may be insured under Section 203(b) and

a cash escrow established to assure the completion of repairs.

This is intended to be the Department\'s primary repair tool and

Field Offices are encouraged to make it available for

properties which qualify. Both

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5/94 10-2

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4310.5 REV-2

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owner-occupants and investors are eligible to purchase

properties under this program.

B. Cost of Repairs. The CPO shall determine the cost of the

necessary repairs, based upon the appraisal, REAM inspection,

on-site staff inspections (if necessary) and office analysis.

Consult with the Chief Architect and, if appropriate,the Chief

Appraiser, as necessary.

C. Maximum Repair Escrow. Properties to be made available must

require less than \$5,000 worth of repairs. The actual escrow

amount will be 110 percent of the estimated repair cost. For a

property with a repair amount at the maximum of \$5,000, the

escrow amount will be \$5,500. In order to compensate lenders

for establishing and maintaining this escrow account, a fee of

\$200 will be paid by HUD to the lender at the time of sales

closing.

D. List of Repairs. Provide bidders with a list of the repairs

needed to make the property insurable and the estimated cost of

repairs. Use the appraiser and/or the REAM to get an estimate

of repairs at the time of acquisition, whenever possible.

Instruct the REAM to post the lists of repairs in the

properties and to leave a supply for prospective purchasers.

E. Unrepaired Value to Calculate Thresholds. Under the Best Offer

Procedure, the acceptable price thresholds as established by

Headquarters must be calculated using the property\'s unrepaired

value.

F. Uninsured Sales. Bidders may submit offers which do not

require insured mortgage financing on properties which have

been advertised under the repair escrow procedure.

G. Inspections. As part of its responsibility for administering

the escrow account, the lender shall arrange and pay for the

inspection of the completed repairs. The lender may use either

the mortgagee certification procedure or request an inspection

by the inspector under contract to inform the Field Office

that the work has been completed. If a contract inspector

inspection is requested, the lender must provide a copy of the

CPO\'s list of required repairs to the inspector. Payment for

the inspection shall come from the \$200 maximum allowable fee

for establishing the escrow account.

H. Completion of Repairs. Generally, all repairs are to be

completed by the purchaser within 90 days of closing. Upon

satisfactory completion of repairs the lender must disburse

the escrow to compensate the buyer or the contractor, as

appropriate. If actual repair costs are less than the amount

escrowed, the balance in the escrow will be applied to reduce

the outstanding principal balance of the mortgage. If the

escrow is inadequate, or if additional items of repair are

discovered at some subsequent date, it is the buyer\'s

responsibility to bear the additional cost. If the buyer fails

to complete the required repairs within 90 days of closing, or

such additional time as is determined reasonable, or the

repairs are unsatisfactory, the lender must apply the escrow

amount to reduce the outstanding principal balance of the

mortgage.

10-9 Section 203(k) Financing Program. The 203(k) program may be used in

connection with as-is, uninsured listings. The program allows a

buyer to obtain one mortgage loan to finance acquisition and repair,

provided the amount of repairs required makes financing feasible.

A. Use of 203(k) Financing. This program allows purchasers of

HUD-owned properties that are not eligible for standard insured

mortgage financing to finance their purchase with an insured

203(k) mortgage. See HUD Handbook 4240.4 REV-2, 203(k)

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10-3 5/94

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4310.5 REV-2

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Handbook, Rehabilitation Home Mortgage Insurance, for a

description of the 203(k) program for HUD-owned properties.

The following conditions must be met:

1\. There are lenders in the area that will process the 203(k)

application;

2\. The value of the property plus the cost of rehabilitation

make 203(k) financing feasible, (i.e., properties for

which the \"as-is\" value plus the cost of rehabilitation

does not exceed 110 percent of the after-repaired market

value by more than 10 percent. An example is: As-is

value plus cost of rehabilitation = \$70,000, but 110

percent of the after-repaired market value = \$62,000.

This makes the property infeasible, because the as-is

value plus the cost of rehabilitation is 13 percent higher

than 110 percent of the after-repaired market value. To

make it feasible, the \"as-is\" value plus the cost of

rehabilitation, should not exceed \$68,200. However, the

purchaser must realize that the maximum mortgage amount

will be limited to \$62,000 plus closing costs. The

purchaser must place the difference in cost in the escrow

account in cash, out-of-pocket); and

3\. Sound underwriting principles are followed.

4\. An appraisal is used to establish both the \"as-is\" and

\"as-repaired\" values.

B. Eligible Properties. All properties in HUD\'s inventory (except

condominiums) that are not eligible for financing under Section

203(b), needing a minimum of \$5,000 in major repairs (and/or

eligible improvements as listed in HUD Handbook 4240.4 REV-2,

paragraph 1-7), are potentially eligible for the 203(k)

program. This includes vacant land when an existing home will

be moved to the site.

C. Eligible Rehabilitation and/or Improvements. Mortgage proceeds

must be used in part for rehabilitation and/or improvements to

a property. There is a minimum \$5,000 requirement for the

eligible improvements on the existing structure on the

property. Minor or cosmetic repairs by themselves are

impracticable and unacceptable; however, they may be added to

the minimum requirement (in addition to \$5,000). The mortgage

must include one or more of the eligible items shown in HUD

Handbook 4240.4 REV-2, paragraph 1-7, with a cumulative minimum

of \$5,000. Included in the cost of rehabilitation are

anticipated repair costs, discount points and origination fees.

D. Required Improvements. All rehabilitation construction and/or

additions financed with Section 203(k) mortgage proceeds must

comply with Cost Effective Energy Conservation Standards. See

standards shown in HUD Handbook 4240.4 REV-2, issued 12/06/91.

E. Pricing. Set the listing price for properties offered under

this program at their \"as-is\" fair market value.

1\. In the listing, state that the downpayment will be

calculated on the basis of the actual \"as-is\" sales price

being paid, plus HUD\'s estimated rehabilitation cost.

2\. The buyer makes the downpayment at the sales closing.

F. Priority Processing. If a 203(k) application is processed by

HUD, the Field Office development staff will provide priority

processing to ensure that all reviews are accomplished in a

timely manner, thereby allowing the lender to close the loan

within 60 days of bid acceptance. Direct Endorsement Lenders

may process these loans if properly trained and approved by

HUD.

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5/94 10-4

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4310.5 REV-2

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G. Inspections.

1\. After the contract acceptance by HUD, the selling broker

should arrange to have the utilities turned on in the

purchaser(s)\' name to ensure the working condition of the

heating, plumbing and electrical systems. If the

utilities are not turned on for inspection, a 15 percent

contingency reserve will be required. If the utilities

are subsequently turned off the purchaser is responsible

to notify the HUD Field Office and rewinterize the

dwelling, if necessary. All costs are borne by the

purchaser.

2\. Prior to closing the loan, the buyer should walk through

the dwelling to ensure that no additional damage has

occurred due to vandalism, etc. Corrections to the work

write-up may be necessary to ensure that there are

sufficient funds to pay for the added repairs; otherwise,

the buyer may be required to use their own funds to make

the repairs if the work is not considered eligible as a

contingency item. (See HUD Handbook 4240.4 REV-2,

paragraph 1-7).

H. Offer to Purchase. The instructions to selling brokers should

state that:

1\. They are to indicate on line 4 of Form HUD-9548 (Appendix

39\) that the buyer intends to use 203(k) financing.

2\. The buyer must take care to include those financing costs

specific to the 203(k) program in the deduction figure to

be entered in item 5 of the Form HUD-9548 if the buyer

wants HUD to pay these costs at closing.

3\. Selling brokers will be paid a sales commission on the

basis of the actual sales price, not on the basis of the

estimated 203(k) loan.

10-10 Uninsured Sales Properties which in their present condition fail
to

qualify for the foregoing types of financing are to be made

available for sale without mortgage insurance.

A. Failure to Meet MPS and Environmental Requirements. Properties

which meet the intent of MPS should ordinarily be offered for

sale on an uninsured basis when any of the following conditions

are present:

1\. The property is subject to occasional flooding or is

located in a Special Flood Hazard Area (SFHA) in a

community which is suspended from or not participating in

the National Flood Insurance Program or the property is on

moderately unstable soil. (See paragraph 9-14 and 9-18 F.

for advertising requirements with respect to floodplain).

2\. Commercial/industrial encroachment jeopardizes the

economic life of the property as a residence.

3\. The property is not in keeping with surrounding

structures.

4\. The property is located in a downward transitional area

which is already heavily blighted.

5\. The property is located in an airport clear zone, as

identified under 24 CFR Part 51 Subpart D, and a

disclosure statement must be secured.

6\. Other appropriate reasons as determined by the Field

Office.

Additionally, Field Offices must ensure that the decision to

deny mortgage insurance on properties which meet the intent of

the MPS, does not have a disparate impact on

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10-5 5/94

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4310.5 REV-2

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those individuals covered by the Federal Civil Rights laws.

Ensure that the case file is documented to reflect decisions

made and action taken.

B. Properties With Deed Restrictions. Properties with deed

restrictions will be disposed of with all existing restrictions

including requirements from the Environmental Compliance Record

(Appendix 18) and applicable restrictions in Federal, State or

local law.

C. Procedures Unique to Uninsured Sales.

1\. The case file must include the inspection report or other

documentation used as the basis for the determination that

the property is uninsurable.

2\. All building or code violation notices in HUD\'s possession

at the time of sale will be given to the purchaser.

Notify the local government of the sale of each property

containing such violations, stating purchaser\'s name and

address, and return all future building or code violation

notices to the issuing body.

10-11 Repaired Sales. Although the as-is sales approach is the preferred

disposition technique, Field Offices may undertake limited repairs

prior to selling certain properties. The repair and sell technique

should be used on an exception basis only and should not be used

where such sales would adversely effect the office\'s performance

indicators.

A. When to do Repairs. A property may be programmed for repairs

only when the necessary staff and contractor resources are

available, the repairs required are of a limited nature and can

be accomplished expeditiously, and one or more of the following

are true:

1\. Repair would clearly bring the greatest net return.

2\. The property does not qualify for the as-is, insured sales

programs and conventional financing for such unrepaired

property is generally unavailable.

3\. As-is listing would severely impede sale.

4\. The property needs repair to comply with actively enforced

local codes or unrepaired sales are prohibited by such

codes or local ordinance.

B. Repair Limitations. Repairs shall be limited to minimum

essential items to comply with HUD mortgage insurance criteria,

or to otherwise comply with actively enforced local codes.

Additional repairs or upgrading may be done only after

reasonable market exposure. Prices must be raised to reflect

greater market value.

C. Warranty. Insured sales may not include any warranty

whatsoever. If, as a result of repair, HUD received

manufacturer or contractor warranties, these should be passed

on to the buyer. In the case of the latter, the buyer\'s

recourse is not with HUD.

10-12 Razing for Lot Sale. Some properties are so dilapidated that their

repair by HUD or by a purchaser is not feasible. Such properties

may be razed for sale of the vacant lots if one or more of the

following conditions exist:

1\. The property has already been unsuccessfully offered for

sale in its \"as-is\" condition.

2\. A local ordinance or agreement prohibits \"as-is\" sales of

such properties.

3\. The property must immediately be razed by HUD to remove a

serious public hazard.

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5/94 10-6

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4310.5 REV-2

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A. Environmental Compliance. When the Environmental Compliance

Record indicates a property is historic (see Historic

Preservation at paragraph 6-18 B.), the Field Office must notify

the State Historic Preservation Office of HUD\'s proposed action.

B. Listing Price. The listing price for a vacant lot will be the

estimated market value of the lot based on comparable vacant lot

prices, considering highest and best use.

C. Policy Alternative/Advertising. Where there is no immediate need

to raze the property and where it would be inappropriate to

simply sell the property \"as-is\", the property may be sold with a

requirement that the buyer raze the property after sales closing.

If this requirement is not possible, advertise the property with

a statement that \"The property is not habitable and should be

demolished.\"

10-13 Auction Procedures. Use of the auction process is limited
primarily

to properties which are aged (those in inventory six or more months

which have received extensive market exposure) and/or hard to sell.

Headquarters provides a national auction contractor which may be

utilized by Field Offices as appropriate. Written approval must be

obtained from Headquarters prior to proceeding with an auction.

When the services of the national auction contract are not available

and authorization has been granted by Headquarters, Field Offices

may contract for auctioneer services locally. See paragraphs 10-13

R. and S. for further information. Properties are not to be held

off the market for more than 30 days in preparation for an auction.

A. Selection of Properties. Auctions may be conducted for any

property whose current value is \$10,000 or less, regardless of

the time it has been in HUD\'s inventory, or for any property

that has received six-or-more months of market exposure. A

SAMS Ad Hoc Report #20780 has been designed to assist in

determining market exposure.

B. Pricing. Properties to be auctioned must be priced in the same

manner as standard individual property sales. The formula for

pricing properties for bulk sales must not be used. If the

property was previously offered by means of standard

procedures, its price may not be reduced by more than five

percent in the auction listing. Field Offices may, however,

reduce the price of auction properties by more than five

percent if the office obtains a new appraisal which justifies

such a reduction. The new listing price must be supported by

the appraisal, which is to be maintained in the case file.

C. Insured Sales. Normally, auction sales will be as-is,

uninsured. However, if the properties qualify, they may be

auctioned with insured mortgage financing available. For

insured auction sales, the following rules apply and should be

published for the benefit of all prospective buyers:

1\. Insured offerings must be distinguished from uninsured

offerings.

2\. The listing price must be stated.

3\. Downpayment requirements. Follow the procedures described

in paragraph 10-7.

4\. Mortgage amounts. Follow the procedures described in

paragraph 10-7.

D. Who May Hold Auctions. The auction may be held either by a

competitively contracted professional auctioneer or by HUD

staff.

E. Listing Price. Field Offices may either state the listing

price or leave it unstated, except that for insured offerings

there must be a stated listing price. The public must

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10-7 5/94

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4310.5 REV-2

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be informed in all cases, however, that whether or not there is

a stated listing price, HUD reserves the right to reject any

bid.

F. Absolute Auctions. Absolute auctions, where certain properties

in a given auction are sold to the highest bidder regardless of

price, shall be extremely limited. No more than 20 percent of

the properties in a given auction may be absolute, and only if

the sale on an absolute basis likely will result in a savings

to the Department, based on the projected additional cost of

holding such properties in inventory.

G. Advertising. Place announcements of the auction in classified

newspaper ads, in addition to the Broker\'s Information Package.

The announcement must contain the following:

1\. Time, date and place of the auction.

2\. List of the properties (include case number and address)

or a statement that a list is available at the Field

Office if large numbers of properties will be auctioned.

3\. Earnest money requirements.

4\. A statement as to whether properties are being offered

individually or in bulk, the terms and conditions of sale

and essential rules of the auction. In lieu of placing in

newspaper ads or Broker\'s Information Package, this

information may be furnished to prospective bidders at

auction. (See Appendix 27, Rules Governing HUD Auction.)

5\. HUD\'s estimate of market value for each property unless

the price is not to be published. Listing prices must

equal the value indicated on the Disposition Program.

6\. Statement that the services of a real estate broker are

required to see the property and to submit an offer. (The

sales commission to be paid may not exceed three percent.)

7\. Statement that HUD reserves the right to reject any offer.

8\. A statement of the sales related costs HUD will pay.

9\. The disclosure and statements required in Chapter 9.

H. Acceptance of Highest Bid. Properties will be awarded to the

person submitting the highest acceptable net offer. No

priorities will be granted to owner/occupants over investors.

The net offer must meet or exceed the acceptable thresholds

provided by Headquarters.

I. Counteroffer. The standard counteroffer procedure may not

be used in an auction. However, if the high bid is not

acceptable, the auctioneer may consult with relevant HUD staff,

announce to the audience that the high bid is not acceptable

and ask if anyone will bid an amount equal to the amount HUD

determines to be acceptable.

J. Registration. A registration log will be prepared to serve as

a permanent record. The recorder will:

1\. Require all attendees to enter their names and addresses

in the log before entering the auction area.

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5/94 10-8

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4310.5 REV-2

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2\. Ensure that attendees desiring to bid fill out separate

registration cards with their names, addresses and

telephone numbers. Each potential bidder is given a large

card prominently displaying bidder\'s identification number

(numbered sequentially from one 1 ). The bidder\'s ID

number is entered on the registration card. Completed

registration cards are to be given to the sales clerks.

3\. Permit only those with ID cards to bid. Others attendees

may qualify to bid at any time during the auction provided

they obtain ID cards. Prominently display in the auction

room copies of the auction rules, instructions on earnest

money deposits, the listing of available properties, and

sales closing requirements.

K. Announcements. Immediately before the auction, announce the

rules governing the auction, terms of sale, earnest money

requirements, sales closing deadlines, and other pertinent

information.

L. Earnest Money Requirements. See paragraph 10-18.

M. Recorder. The auctioneer should be assisted by a recorder who

writes down the results for each property and by one or more

runners to give the results to sales contract personnel.

N. Sales Contracts. Sales Contracts must be prepared in advance

with available information. An upper corner must have the

property\'s sequential number as in the listing. As runners

deliver their cards, the sales clerks will complete the sales

contract by using the registration cards to obtain names,

addresses and telephone numbers.

O. Contract Execution. Form HUD-9548, Sales Contract, (Appendix

39\) must be executed by the purchaser during or immediately

after the auction. Failure to execute the sales contract

immediately after the auction or submit the earnest money shall

render the offer null and void.

P. Sales Closing. Sales closings must be held within the same

time frame as individual sales (30 to 60 days after execution

of sales contract, as determined locally), unless extended.

Field Offices shall follow-up each sale to ensure timely

closing or cancellation as appropriate. The auctioneer will be

paid the commission as stated in the contract specifications at

the successful completion of the sales closing.

Q. SAMS Coding. Upon closing each property sold at auction, the

office must code the auction sale in the SAMS System. (See the

SAMS User Handbook for current instructions.)

R. Contracting for Auctioneer Services. A professional auctioneer

may be contracted by HUD to hold an auction of single family

properties. If the auctioneer is a licensed broker in the

jurisdiction of the properties to be sold, he may function in

that capacity as well. If the auctioneer is not a licensed

broker, he must enter into an agreement with a licensed broker,

who will act in the auctioneer\'s behalf to show properties

prior to the date of the auction and perform such other

functions only a licensed broker may perform. To the extent

that other selling brokers are used, it is the responsibility

of the auctioneer to compensate them.

S. Contracting. All services performed by the auctioneer must be

set forth in a contract. Instructions for the contract format

are included in Handbook 2210.16 REV-4, Regional Contracting

Handbook. For assistance in preparation of such a contract,

the Field Office must contact the appropriate Regional

Contracting Division.

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10-9 5/94

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4310.5 REV-2

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T. Bid Basis. If bid basis is percentage of sales, inform all

prospective auctioneers of the approximate total value of the

offering. Where competitive negotiation is permitted, the fee

should not exceed eight percent of the total received. It must

be clear in the solicitation whether the auctioneer must pay

advertising costs out of his commission or whether HUD will

provide an allowance for that and perhaps other expenses.

U. Role of Selling Brokers. Selling brokers will not be used to

submit offers, except in a case where the auctioneer has

entered into an exclusive arrangement with one broker. The

sales commission will be paid under the provisions of the

contract. Again, if the auctioneer permits the participation

of other brokers, it is his responsibility to establish the

terms for this participation and to compensate the brokers.

V. Advertisements. Auctioneers must arrange for, procure and/or

place all forms of advertising, subject to HUD approval. The

ads must have the essential information as in paragraph 10-13

G., including the information as to how the property may be

shown.

W. Costs. All costs, including advertising and fees for auction

personnel should be included in the price ultimately arrived at

in the contract. However, Field Offices may elect to extract

the advertising cost, providing a separate allowance for it. A

cost or price analysis will be made prior to execution of the

contract along with a determination that the contract price is

reasonable.

X. Competition at Auctions. Contract must provide that the

auctioneer cannot use unduly restrictive procedures or

standards that tend to limit competition at the auctions.

Y. HUD Staff Conducts Auction. Staff time permitting, Field

Office staff may hold an auction to sell single family

properties. The auction site may be in the Field Office, or

suitable facilities may be rented.

Z. Expenses. Account for expenses as follows:

1\. Execute a Purchase Order, Form HUD-2542 which must include

the following statement: \"An equal share of the total

cost must be allocated to each property listed in the

attachment.\" Attach to the Form HUD-2542 a list of all

properties, with case numbers and invoices or contract for

services being paid.

2\. Properly certify and send Form SAMS-1106 to the SAMS

contractor for payment processing.

AA. The Bid Process for Silent Bid Auction.

1\. Beginning. The auctioneer begins the auction process by

announcing the property to be auctioned, i.e., its

sequential number, address and price.

2\. Silent Bidding. Bids are called for on the property at

successively higher prices. Bidders indicate the desire

to purchase at the price called by silently raising their

numbered cards. This process continues until one bidder

is left.

3\. Calling Out Result. When the bidding is over, the

auctioneer calls out the property\'s sequential number,

address, sales price and bidder\'s ID number.

4\. Record Log. A record log will be kept by the recorder

which contains all auction results. It must be prepared

ahead of time with each property\'s sequential number,

address and listing price; space should be provided for

actual sales price and bidder ID number. When the

auctioneer announces the winning bid, the recorder enters

the sales price and bidder ID number.

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5/94 10-10

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4310.5 REV-2

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5\. The Role of Runners. Registration cards completed in

advance with identical information in paragraph 10-13 J.

are to be filled in by runners. When bidding is over, the

runner delivers the cards to the sales clerks.

AB. The Bid Process for Oral Bid Auction.

1\. Beginning. The auctioneer starts the bidding process by

calling out the property\'s listing price, if stated; if

not, he commences bidding at some appropriate level.

2\. Bids. Bidder\'s call out their bids and show their ID

cards.

3\. Other. All other aspects of the silent bid process apply.

10-14 All Cash Bulk Sales. Designed to boost sales in soft markets, the

all cash, \"as-is\" bulk sales program features:

1\. The option to publish or not publish the listing price.

2\. Selling brokers may claim up to a three percent sales

commission.

3\. Requirement for purchasers to provide their own financing.

4\. The best net offer procedure is applicable to bulk sales.

A. Property Selection. Eligible properties include uninsurable

properties, vacant lots and occupied properties. Generally,

properties should be marketed individually prior to being

offered in bulk. In addition, a limited number of better

properties may be included in a bulk package of predominantly

less attractive properties, if doing so would enhance the

properties\' overall marketability.

B. Terms of Sale. Properties will be made available on an all

cash, as is basis, without warranty and without FHA insured

mortgage financing. Sales must be closed within the time frame

established by the Field Office. The time frame established

must not exceed 60 days from the date of contract award.

C. Size, Composition of Bulk Offering. There are no limitations

on the total number of properties that may be offered for bulk

sale or in an individual bulk package. However, for broadest

market appeal, properties usually should be grouped in small

packages of 10 or less.

D. Pricing. Although there will be the option to publish or not

publish the listing price, the Field Office must establish an

acceptable price for each property and a total price for each

package. The listing price must be the \"as-is\" value of the

property less:

1\. A three percent sales commission based on the estimated

\"as-is\" sales price.

2\. An amount the Field Office estimates is typical for

closing costs, including discount points to a purchaser.

3\. Savings in holding costs which are determined by

multiplying the current daily holding costs, as provided

by Headquarters, by the number of days anticipated that

the property normally would remain in inventory. This may

not exceed 40 percent of the office turnover rate or the

national turnover rate, whichever is smaller.

E. Listing Period. The listing period for bulk sales is 15 days.

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10-11 5/94

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4310.5 REV-2

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F. Advertising Bulk Sales. The CPO must advertise bulk sales in a

major newspaper and may prepare a release for direct mailing to

potential bidders. The advertisement must include the

following minimum information.

1\. How and when properties can be inspected.

2\. The 15-day bid period.

3\. Addresses of properties or where to obtain a listing

showing each property address.

4\. Terms of sale and instructions for submitting bids.

5\. Number of properties in package.

6\. Listing price for each property and total for each package

(if applicable).

7\. Statement that there is no published listing price (if

applicable).

8\. Amount and form of deposit and forfeiture policy.

9\. Specified time in which to allow HUD to award contract (30

days).

10\. A prospective purchaser may bid on any and all packages

but may not exclude individual properties from a package.

11\. HUD reserves the right to withdraw properties from a

package, for such reasons as lack of title evidence and

other related items.

12\. Statement as to whether property is occupied. In case of

occupancy, the advertisement shall state that the property

is rented month-to-month, sold subject to occupancy, and

that delinquent rent accounts are HUD property and not

included in the sale.

13\. Identify properties built prior to 1978 that may contain

lead-based paint hazards.

14\. Identify properties that require a HUD 24 CFR Subpart 51D

notification, flood insurance requirements, historic

preservation deed restrictions, and any known violations

of local codes and HUD minimum property standards.

15\. Statement that the offering is all cash.

16\. Fair Housing/Equal Opportunity Advertising Guidelines.

Incorporate requirements of paragraph 9-8.

17\. HUD will pay up to three percent sales commission to

licensed brokers.

18\. A statement that the seller has inspected all properties

constructed prior to 1978 for defective paint surfaces.

If defective paint surfaces were found, seller has removed

or will remove such defective surfaces in a manner

prescribed by HUD prior to closing.

19\. Statement that the buyer pays all closing costs.

20\. A statement on whether direct offers (Field Office makes

this determination) are acceptable. If so, the Field

Office must have procedures for handling earnest money

deposits.

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5/94 10-12

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4310.5 REV-2

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G. Earnest Money Requirements and Forfeiture.

1\. Earnest money (money order, certified or cashier\'s check)

shall be 10 percent of the total package bid, submitted

with the bid. Upon acceptance of the highest net

acceptable offer, the earnest money is to be deposited by

the local office. Earnest money deposits of the

unsuccessful bidders are to be returned promptly.

2\. High bidder\'s deposit shall be forfeited if unwilling or

unable to close, regardless of the reason.

3\. State the following forfeiture policy in the

advertisement:

\"Earnest money deposits submitted by successful bidders

who fail or refuse to perform under the terms of the

contract of sale shall be retained as liquidated damages.

Such failure or refusal to perform shall include the

purchaser\'s inability to obtain financing.\"

H. Submitting Offers.

1\. A prospective purchaser may submit bids on any or all

packages during a 15-day listing period.

2\. The overall bid for the total package must also be broken

down into bids for each property in the package.

3\. Offers will be submitted by normal sealed bid procedures

using Form HUD-9544, Bulk Sale Contract (All Cash)

(Appendix 24) as follows:

a\. Separate forms will be used for each individual

package or group of properties on which any one

person bids.

b\. In the upper right hand corner on the Form HUD-9544,

bidders will enter the group number or package number

identifying the bulk sale package.

4\. Net offers which equal or exceed the acceptable thresholds

as provided by Headquarters may be accepted for

processing, but the award should not be made until the CPO

has made a formal analysis. A net offer shall be

determined by the difference between the total purchase

price minus a sales commission (if applicable.)

I. Title Transfer. Those legal instruments normally used to

convey title in acquired property sales shall also be used for

the all cash bulk sale.

J. Closing Costs/Discount Points. HUD will not pay these costs

since they have been deducted in determining the sales price.

K. Extensions to Closing Date. If scheduled closing dates cannot

be met, purchasers may request extensions of the closing time.

(See paragraph 11-12 for instructions.)

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10-13 5/94

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4310.5 REV-2

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SECTION IV - SALES PROCEDURES (LISTING TO CLOSE)

10-15 Listing. Unless specified in another HUD program, following
receipt

of the appraisal, preparation of the disposition program, and

providing necessary lead time to meet publication deadlines, new

acquisitions shall be advertised in the next weekly listing (or BIR,

if so approved) unless a small sales volume warrants less frequent

advertising. Unless under rehabilitation, each property shall be

advertised no later than 30 days from acquisition; if under

rehabilitation, within 60 days from acquisition. No later than the

advertised date, each case is to be moved in SAMS to DM step 6

(Listed for Sale). See SAMS User Manual, Case Management Subsystem,

for details.

If new listings are published in newspapers, extended listings

should be limited to the BIR, as provided by in the marketing plan.

NOTE: As used herein New Listing means: any property advertised

for the first time; any property which is relisted because of a

cancellation of a sales contract; and, any property which is

reanalyzed and listed for sale under a different price or terms.

NOTE: A property is considered to have been acquired when it is

entered into SAMS. Properties held off the market via the

disposition program or those that fail to interface with the

Insurance in Force or Claims Systems are excluded from the

advertising timeframe, but must be advertised as soon as they become

available for the sales market.

10-16 Listing Information.

A. Sales listing information shall include as a minimum the

following:

1\. FHA Case Number

2\. Address of Property

3\. Listing Price

4\. Date, Time, and Place of Bid Opening

5\. Type of Sale

6\. Any zoning and code violations as well as major defects or

structural problems which the Field Office has knowledge

of which could affect the purchaser\'s health or safety.

B. Simultaneous Offering Period. Unless a different procedure is

specifically authorized by Headquarters, properties which do

not fall within the guidelines for the Full Offer Procedure, as

described in paragraph 10-16 D., shall be initially listed for

a 10-day period with all offers received during the 10 days

considered to have been received simultaneously. Offers

received prior to listing shall be returned unopened. If a

signed contract is eventually canceled, and in the absence of a

back-up offer, the property must be readvertised for a new

10-day bid period rather than being placed in an extended

listing period.

C. Bid Openings. Bid openings are public and shall be conducted

on the first workday following expiration of the 10-day period,

at the published time and place. Where location constraints

and/or large numbers of offers preclude openings on the first

workday, they should be scheduled at an appropriate place and

time, not to exceed the second workday. Bid openings shall be

held weekly unless a small sales volume warrants less frequent

openings.

D. Full Offer Procedure. This procedure permits the opening and

acceptance of qualifying bids prior to the end of the 10-day

listing period.

1\. The \"Full Offer\" procedure applies only to new listings

and only to

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5/94 10-14

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4310.5 REV-2

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owner-occupant purchasers.

2\. To qualify, the net offering price, Item 7 of form

HUD-9548, Sales Contract (Appendix 39) must equal or

exceed 89 percent of HUD\'s listing price. The requested

sales commission must not exceed six percent and the

combined sales commission and requested closing/financing

costs, as shown on Line 5 of the form HUD-9548, Sales

Contract, (Appendix 39) must not exceed 11 percent. If a

Field Office elects to increase the maximum allowable cost

for financing/closing expenses, it may pay up to six

percent (see Purchaser\'s Financing and Loan Closing Costs

at paragraph 6-22 C.3.a); the net amount must then equal

or exceed 88 percent of the listing price.

3\. The envelope containing the offer, in addition to other

requirements, must be marked \"Full Offer.\" Upon opening

such an envelope, if it is noted that the enclosed offer

does not qualify as a Full Offer, the envelope shall be so

noted, resealed and subsequently reopened at the regular

bid opening. Details of the offer shall not be disclosed

prior to its opening at the regular bid opening.

4\. It is suggested that the public bid opening be conducted

on a daily basis, at an established time. However, a

Field Office may determine that it is more appropriate to

hold the bid opening for full offer bids on a less

frequent basis, e.g., every other workday.

5\. Prior to use of this procedure, brokers must be fully

advised of its details. Newspaper ads or the BIR must

also clearly state how bids will be accepted.

6\. If the property has not been sold prior to the expiration

of the 10 day bid period, all bids marked \"Less than Full

Offer\" and those which were unmarked or improperly marked,

are opened in the same manner as normal bid openings.

Properties remaining unsold then become available under

the extended listing.

E. Offers received after the 10-day period may not be considered

at the bid opening. Such offers shall be considered during the

extended listing period.

F. Extended Listing Period. The advertisement shall provide for

an Extended Listing Period. Properties not sold will remain

available until sold or until they are relisted under different

terms. The advertisement must also state the time and place

for opening of bids received under the Extended Listing Period.

1\. There shall be daily opening of bids received under

extended listing.

2\. All offers received on the first day following expiration

of the 10-day period will be considered as being received

simultaneously.

3\. The highest acceptable net bid shall be accepted on this

same date.

4\. If no offers are received on the first day following

expiration of the 10-day period, the same procedure shall

be followed on each subsequent day until an acceptable

offer is received or the property is relisted under

different terms.

10-17 Purchase Offer Requirements. All offers submitted must consist of
a

fully completed form HUD-9548, Sales Contract (Appendix 39) signed

by both the submitting broker and prospective purchaser and

accompanied by the Lead-Based Paint Addendum (Appendix 58) where

appropriate. The full required earnest money deposit must be

remitted by the purchaser at the time he/she signs the contract.

The deposit shall be forwarded to HUD with the contract or deposited

in the broker\'s escrow account, at the Field Office\'s option.

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10-15 5/94

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4310.5 REV-2

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Further details on earnest money requirements are in paragraph

10-18. The Field Office may also require that all supporting

exhibits for mortgage credit analysis accompany the initial

submission of the offer.

A. Form HUD-9548, Sales Contract (Appendix 39) provides for offers

to be submitted with certain deductions from the offering

price, resulting in a net offer to HUD. Priority in acceptance

of sales offers will be given to those producing the greatest

net return to HUD.

1\. Item 5 of the Sales Contract (Appendix 39) must include a

dollar amount for the financing/closing costs the buyer

expects HUD to pay, not to exceed five (5) percent of the

sales price (Item 3 of the Sales Contract (Appendix 39) or

such other Headquarters approved limit.

a\. The fees for HUD\'s contract closing agent and the

wire transfer of sales proceeds are not to be

included in Item 5 or considered in the best net

calculation.

b\. Pre-paid items, such as real estate taxes, insurance

and interest, are not considered to be financing

and/or closing costs and cannot be paid by HUD out of

the Item 5 allowance. The closing agent\'s

responsibility, as well as that of the Chief Property

Officer, is to ensure that the Item 5 allowance is

not exceeded at settlement and that only actual costs

are paid.

2\. Brokers may be advised that offers to purchase may be

enhanced by claiming less than the maximum authorized for

both or either financing/closing expenses and the sales

commission.

3\. Item 6 on the Sales Contract (Appendix 39) must include a

dollar amount, including any HUD-authorized bonus, the

broker is claiming for a sales commission.

4\. Deduct the total of Items 4, 5 and 6 of the Sales Contract

(Appendix 39) from the offering price (Item 3) to arrive

at the net return to HUD.

B. Offers must be received in sealed envelopes marked with the

case number, property address, and return address of the

broker. Consider any offer which does not indicate occupancy

as an investor offer.

C. Offers May Be Received Via The Facsimile (FAX) Machine. The

real estate industry should be notified of the availability of

this method of submitting bids through industry meetings,

newspaper advertising or the BIR.

The Electronic Message Routing Form (EMRF) together with an

electronically transmitted copy of the first page of form

HUD-9548, Sales Contract (Appendix 39), and an electronically

transmitted copy of the Lead-Based Paint Addendum (Appendix 58)

constitutes a competitive bid to buy a HUD property. When

received, the first page of the Sales Contract (Appendix 39)

and Lead-Based Paint Addendum should be placed in an envelope,

sealed and the EMRF affixed to the envelope. The sealed bid

should then be processed with other bids received through the

mail system and hand deliveries. In those instances where a

facsimile offer represents the highest net bid, the selling

broker shall be required to submit the original sales contract,

containing the signatures of the purchaser and broker, to the

Field Office within a reasonable time (e.g., 24 hours) for

award.

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5/94 10-16

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4310.5 REV-2

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HUD assumes no liability for errors in the EMRF and/or Sales

Contract (Appendix 39) and continues to reserve the right to

reject any and all bids and to waive any informality or

irregularity in any bid. Properties are subject to withdrawal

or change without notice. This statement should appear in

local advertising.

D. Simultaneous Offers. Brokers may submit unlimited numbers of

offers on an individual property provided each offer is from a

different prospective purchaser. If multiple offers are

submitted by one purchaser on one property, only the offer

producing the highest net return to HUD will be accepted. If a

prospective owner-occupant submits a bid on more than one

property, the offer which yields the highest net return

percentage to HUD will be accepted, with all other offers on

any other properties eliminated from consideration. The

exception to this is that if the bidder\'s offer is the only

acceptable one on a property, then that offer must be accepted

and all other offers on any other properties eliminated from

consideration.

E. Back-up Offers. Back-up offers may be held when bidders so

indicate. See Item 10 of the Sales Contract (Appendix 39).

F. Offers may be received and considered in other than whole

dollar amounts.

G. Priority in the acceptance of sales offers must be given to

offers producing the greatest net return to HUD. The greatest

net return is calculated by subtracting from the bid price

those dollar amounts for sales commission and any other

financing and closing costs that the buyer expects HUD to pay.

These figures must appear on the form HUD-9548, Sales Contract

(Appendix 39).

Example:

Bid Price (item 3) \$60,000

Repair Escrow (item 4) 0

Cost to HUD (item 5) 2,000

Commission (item 6) 3,600

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

Net \$54,400

Unless specifically authorized by Headquarters, sales

commissions on individual improved properties shall not exceed

six (6) percent with a minimum of \$500; on vacant lots, 10

percent with a minimum of \$200.

H. Noncomplying offers are to be returned to the sales broker with

an explanation for the noncompliance decision and information

as to whether the property is still available.

I. Field Offices should review Sales Contracts (Appendix 39)

thoroughly prior to their execution. Should a minor error be

detected that could result in a higher acceptable offer, Field

Offices should take the appropriate steps to have this contract

corrected for the purpose of award. Errors could be minor

mathematical calculations, the absence of an addendum, etc.

When a determination has been made to permit the correction of

a Sales Contract (Appendix 39), Field Offices should stress the

importance of the immediate return of the contract (usually

within 24 hours of the time notified) and should the contract

not be returned within the time period, the next highest

contract should be considered for acceptance.

Field Offices are cautioned against arbitrarily making changes

to the Sales Contract (Appendix 39) without the approval of all

parties. Should it be necessary to have changes made to the

Sales Contract (Appendix 39), all parties involved in the sales

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10-17 5/94

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4310.5 REV-2

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transaction must initial the changes to avoid any contractual

disputes.

NOTE: Each newspaper listing and BIR must state that HUD

reserves the right to reject any offer or waive any informality.

10-18 Earnest Money Deposit Requirements. It is preferable that the

earnest money be held by the selling brokers in their escrow

accounts until closing. However, if the earnest money is submitted

to HUD, it must be deposited upon execution by HUD of the Sales

Contract. Forms SAMS-1116 and SAMS-1116A, Selling Broker

Information and Certification, must be obtained from each selling

broker. In addition to data needed for SAMS, this form sets

forth the broker requirements for earnest money deposits and

non-discrimination. The signed form must be kept on file and

updated by the Field Office on an as-needed basis. If a selling

broker submits a sales contract but does not have a form on file,

the Field Office must not accept the sales contract until a fully

executed form has been received.

A. Earnest money deposits must be in the form of a cashier\'s

check, certified check or money order with no termination date

or cancellation provision, payable to HUD or the broker, if he

or she is to hold the deposit.

B. The minimum earnest money deposit must be \$500 and the maximum

such deposit will be \$2,000. Within these minimum and maximum

limits, the earnest money deposit shall be:

1\. Properties with a sales price of \$50,000 or less, the

earnest money deposit shall be \$500.

2\. Properties with a sales price above \$50,000; establish a

dollar amount between \$500 and \$2,000 that is felt to be

adequate for the Field Office jurisdiction.

C. Vacant Lot Sales. The amount of the required earnest money

deposit for vacant lots is 50 percent of the listing price.

D. The amount of the earnest money deposit is to be the same for

owner-occupant and investor purchasers.

E. Forfeiture of Earnest Money Deposits. Applicable in all

instances except those where HUD is unable or unwilling to

close the sale, in which case return 100 percent of the

deposit.

1\. Investor Purchasers.

a\. Uninsured Sales. Forfeit 100 percent of the deposit

for failure to close, regardless of the reason.

b\. Insured Sales. Forfeit 50 percent of the deposit for

failure to close if purchaser is determined by HUD or

DE underwriter to be an unacceptable buyer. Forfeit

100 percent if sale fails to close for any other

reason.

2\. Owner-occupant Purchasers. Applicable regardless of sale

type unless otherwise stated.

a\. Return 100 percent of the deposit where:

\(1\) There has been a death in the immediate family

(contract holder, spouse, or children living in

the same household);

\(2\) There has been a recent serious illness in the

immediate family

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5/94 10-18

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4310.5 REV-2

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that has resulted in significant medical

expenses or substantial loss of income, thus

adversely affecting the purchaser\'s financial

ability to close the sale;

\(3\) There has been a loss of job by one of the

primary breadwinners, or substantial loss of

income through no fault of the purchaser;

\(4\) On an insured sale, HUD (or a DE underwriter)

determines that the purchaser is not an

acceptable borrower;

\(5\) On an uninsured sale, the purchaser was

pre-approved for mortgage financing in an

appropriate amount by a recognized mortgage

lender and, despite good faith efforts, is

unable to obtain mortgage financing.

\"Pre-approved\" means a commitment has been

obtained from a recognized mortgage lender for

mortgage financing in a specified dollar amount

sufficient to purchase the property;

\(6\) Other equally good cause, as determined by the

Field Office.

b\. On an uninsured sale, forfeit 50 percent of the

deposit in those instances where, despite good faith

efforts by the purchaser, there is an inability to

obtain a mortgage loan from a recognized mortgage

lender.

c\. On either type of sale, forfeit 100 percent of the

deposit in those instances where no documentation is

submitted, where the documentation fails to provide

an acceptable cause for the buyer\'s failure to close,

or where documentation is not provided within a

reasonable time following contract cancellation

(e.g., 90 days).

F. Vacant Lot Sales. The purchaser will be considered as an

investor and the instructions pertaining to forfeiture by

investors will apply.

G. Failure to Abide by HUD\'s Earnest Money Policy Agreement. To

participate in HUD\'s sales program, real estate brokers must

sign the Agreement to Abide in which they certify that they

will comply with HUD\'s instructions on the disposition of

earnest money deposits. If the broker on a sale which fails to

close is holding the earnest money deposit, in either an escrow

or client\'s trust account, written instructions must be

provided to that broker as to the disposition of such funds.

If the broker fails to comply with those written instructions,

within 15 calendar days, the following action(s) should be

taken:

1\. Within 15 calendar days of the date of the initial

notification, forward a second notice to the broker,

demanding the prompt disposition of the earnest money

deposit and advising that failure to comply within 10

calendar days of the date of the second notice may result

in a Limited Denial of Participation (LDP) action for a

period of one year.

2\. If the broker has not complied within 10 calendar days of

the date of the second notice:

a\. Notify the State Real Estate Commission (or proper

regulatory body) as to the broker\'s failure to comply

with his/her certification,

b\. Follow the procedure set forth in 24 CFR, Part 24,

for issuing a LDP against the broker, and

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10-19 5/94

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4310.5 REV-2

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c\. Ensure that offers to purchase are not

accepted from that broker.

10-19 Sales Procedure.

A. All sealed bids must remain sealed and safeguarded until the

specified public opening date.

B. Owner-occupant Priority to Purchase.

1\. In those areas designated as revitalization areas,

properties which will be marketed on an insurable

basis shall be first advertised as available for the

first 20 days to owner-occupant buyers only.

2\. In all areas outside the revitalization areas, all

properties shall be offered for an initial 20 day

period as available to owner-occupant buyers.

3\. The normal 10-day sealed bidding period shall apply

with the balance of the 20 day priority period being

on an extended listing basis.

4\. Should an offer to purchase be accepted during the

initial 20 day period and later be withdrawn, and in

the absence of a back-up offer, and a portion of the

20 day period remains, the property shall be made

available to nonprofits and government agencies,

where applicable, or offered to the general public

for sale.

C. In any competitive bidding process, offers will continue to

be accepted on the basis of the highest net return. In the

event of identical tie net bids, award of the contract shall

be determined by a drawing of lots, except, offers from

owner-occupant bidders, provided they are otherwise

acceptable, shall receive priority.

D. Accept offers that are within the Headquarters established

listing price thresholds. At no time, indicate to the public

that HUD will accept offers which are within a specified

range below the listing price. The thresholds are:

1\. All Competitive Sales (Including Bulk and Auction

Sales).

a\. See memorandum at beginning of handbook.

b\. See memorandum at beginning of handbook.

c\. If a property is located in a revitalization

area and the winning bidder is a nonprofit

organization or government agency, without

any discount being considered, a discount of

30 percent off contract sales price is given.

In non-revitalization areas, the discount to

nonprofit organizations and government

agencies is 10 percent off contract sales

price. Should five or more properties be

purchased simultaneously and the sales close

simultaneously, the discount would then be 15

percent.

2\. Direct (Non-Competitive) Sales to Governmental

Entities and Private Nonprofit Organizations. See

paragraph 10-20 for instructions.

E. Announce all offers when the bids are opened and tentatively

accept the highest net offer. Advise attendees at the bid

opening that this tentative acceptance does not constitute

formal acceptance of the offer which will occur when HUD

executes the form HUD-9548, Sales Contract (Appendix 39).

The earnest money deposit must have been received as part

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5/94 10-20

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4310.5 REV-2

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of the bid package or as an option, the broker must have

deposited the earnest money in his/her escrow account.

F. Record the results of each bid opening on a separate sheet for

each property. The minimum required information:

1\. Date of Bid Opening

2\. Date of Listing

3\. Listing Price

4\. FHA case number

5\. Property address

6\. Purchaser

7\. Selling broker

8\. Bid amount

9\. Net bid amount

10\. Name and title of individual conducting bid opening

11\. Name and title of individual recording bid opening

G. Maintain the original bid sheet in a folder with all other bid

sheets. This folder shall serve as the office\'s official

record of bid openings. Complete each sheet whether or not any

bids are received. Place a copy of each bid sheet in the

individual property case files. Bids may also be entered into

SAMS through the CM DS BR screen, Bids Received Log, and a log

will be created for use as the official bid opening log. See

SAMS User Manual, Case Management Subsystem, for details.

H. Within two working days of the bid opening, notify the broker

using Appendix 52 to formally accept the offer and provide

instructions to take whatever actions are necessary to conclude

the sale. The dates of HUD\'s acceptance of the contract and

notification to the broker should be identical. When a sales

contract has been executed and mailed by HUD, it is considered

to be a legal and binding document and must be followed to the

conclusion of the sale. HUD does not have the ability to

cancel the contract without the written consent of the

purchaser(s).

I. Return all offers not accepted to the selling broker(s) within

two working days of the bid opening. The earnest money deposit

must also be returned either by the Field Office or the broker,

whichever is applicable. In those instances where earnest

money accompanies the sales contract, Field Offices shall

return the unaccepted offers via certified mail to ensure that

the money is received by the broker.

J. Fixed conditions of sale are on the reverse side of form

HUD-9548, Sales Contract (Appendix 39), Items A through 0, and

are self-explanatory.

K. Before rejecting an offer which is slightly below the

acceptable threshold and incurring the added time and expense

of waiting for an acceptable offer, Field Offices should

consider the cost of such a wait. The Department estimates the

delay in the receipt of an acceptable offer will average 15

days. Thus, Field Offices should multiply 15 times the current

daily holding cost. If the result, when added to the offered

amount, is within the threshold, the offer may be accepted.

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10-21 5/94

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4310.5 REV-2

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10-20 Direct (Non-Competitive) Sales to Governmental Entities and
Private

Nonprofit Organizations.

A. Eligible Participants.

1\. Government agencies, including Public and Indian Housing

Authorities; and,

B. Private Nonprofit Organizations as described in 24 CFR 291.405

(also see Terms), summarized as: An organization in which no

part of net earnings inure to the benefit of any member,

founder, contributor, or individual, which practice

nondiscrimination in the provision of assistance, and which

have:

a\. A voluntary board;

b\. A functioning accounting system operated in

accordance with generally accepted accounting

principles;

c\. Nonprofit status as demonstrated by approval under

Section 501(c)(3) of the Internal Revenue Code.

1\. Nonprofit organizations previously qualified to

participate in other HUD programs such as HOPE 3, the

Single Family Property Disposition Demonstration, the

Homeless Initiative, or McKinney Act homeless programs are

automatically eligible to participate. Agencies qualified

as Community Housing Development Organizations (CHDOs)

under the HOME Program, or those routinely designated as

CDBG subrecipients, also qualify.

A nonprofit which has not been qualified to participate in

HUD programs must be pre-qualified by Community Planning

and Development.

2\. Participating nonprofit organizations must also be able to

demonstrate prior experience as a lower income housing

provider within the past two years. Minimum prior

experience is defined as the acquisition, rehabilitation,

and resale of five single family properties during the

past two year period. Organizations lacking this

experience will be restricted to buying 10 properties, and

have to complete rehabilitation and resale of five, prior

to purchasing additional HUD-owned properties.

3\. Where Field Office staff is not cognizant of a nonprofit\'s

capacity to meet the above standard, HUD should require

evidence be submitted to the Chief Property Officer that

the required standards have been met prior to selling more

than 10 properties at the 30 percent discount.

Satisfactory evidence could include: the agency\'s annual

report, an audited financial statement, copies of

contracts on properties resold to lower income buyers,

evidence documenting adequate financing to carry out the

program, and other documents demonstrating the outcome of

prior acquisitions to provide affordable housing.

C. Eligible Properties.

1\. All new acquisitions in revitalization areas that are

programmed for sale as uninsurable and are not being

offered for sale to owner-occupant purchasers under the

20-day priority period.

2\. All properties in revitalization areas that were listed

for sale as insurable which were offered for 20 days to

owner-occupant purchasers but did not sell. For those

properties which were offered for sale as insured with

repair escrow, the listing price will be the uninsured

sales price.

3\. All properties in non-revitalization areas that did not

sell to owner-occupant buyers

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5/94 10-22

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4310.5 REV-2

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during the 20-day priority period.

D. Discount on Sales Price

1\. In revitalization areas, the discount to nonprofits and

government agencies shall be 30 percent off list price.

2\. In non-revitalization areas, the discount to nonprofits

and government agencies shall be 10 percent off list

price. An additional five percent discount shall be added

if five or more properties are purchased simultaneously

and the sales of those properties close simultaneously

within the normal Field Office closing time frame.

3\. See paragraph 10-20 F.9.a. and b. for instructions on

accounting for the discount at settlement.

E. Resale Restrictions

1\. Properties purchased using the 30 percent discount

incentive are primarily intended to be resold to persons

who are at or below 115 percent of median income for their

area, when adjusted for family size, or used to shelter

the homeless.

2\. Properties may not be resold to an investor owner within

one year of HUD\'s closing. Individual exceptions may be

granted in unusual circumstances. A request for such an

exception must be submitted in writing to the Field Office

with reasons given for this type of resale.

3\. Without a specific written exception being granted by the

Field Office, on an individual property basis, properties

may not be occupied by or resold to the spouse, child,

stepchild, parent, stepparent, or business associate of

any of the participating agency\'s officers, directors,

elected or appointed officials, or employees.

F. Sales Procedures Applicable to Governmental Entities and

Private Nonprofit Organizations.

1\. Expression of Interest

a\. Nonprofits and government agencies have five calendar

days following receipt of the listing of available

properties in which to express preliminary interest.

Notification to nonprofit organizations and

government agencies of available properties, except

uninsured properties in revitalization areas, shall

be provided at the time they are listed for sale to

owner-occupants. Notification may be by direct mail

(BIR) or by relying upon the newspaper listing.

Nonprofit organizations and government agencies

should provide their indication of preliminary

interest within the 20-day owner-occupant priority

period. A listing of uninsurable properties in

revitalization areas should be provided to the

nonprofit organizations and government agencies at

the time the disposition programs are approved. For

these properties a written indication of preliminary

interest must be received within 10 calendar days.

Absent either of the above described notifications of

preliminary interest, the properties shall be placed

in the general public listing. Participating

agencies should be encouraged to provide this

indication of firm interest in the form of a signed

sales contract. In any event, sales contracts (form

HUD-9548) should be received by the Field Office

within five calendar days of the notice of firm

interest. Absent receipt of a signed sales contract

within this time frame, the property will be listed

for sale to the general public.

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10-23 5/94

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4310.5 REV-2

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NOTE: It is not expected that Field Offices will

provide listings of available properties to nonprofit

organizations and government agencies except for

those located in specific areas of interest, as

designated by these buyers.

b\. Whenever possible, participants should be encouraged

to communicate with the Field Office by FAX in order

to expedite the entire process.

c\. If more than one agency expresses an interest in the

same property, the first to offer a properly executed

and otherwise acceptable sales contract shall be the

buyer. Agencies interested in the same geographic

areas should be encouraged to coordinate their

activities for maximum benefit to lower income

persons.

2\. Closings are expected to occur within the normal Field

Office closing time frame. In the event a scheduled

closing cannot be held, extension periods may be granted

in 15 day increments only. The buyer must submit a

written request to the CPO for an extension of the closing

date, accompanied by a non-refundable fee per property

that is consistent with the extension fee in effect for

the Field Office. The participating agency will be

credited for any unused portion of the extension period at

closing.

3\. If HUD experiences repeated delays in scheduled closings

with a program participant, the CPO should require an

earnest money deposit of \$500 per property on future

transactions. The deposit shall be subject to forfeiture

on the same basis as other sales which fail to close

within the contract time frame, including approved

extensions.

4\. No real estate broker will be used, and no sales

commission or closing/financing costs will be paid. Sales

closings shall be conducted by HUD\'s contract closing

agents.

5\. Property taxes will be prorated to the date of closing

between HUD and the participating agency. HUD will not

transfer a property for which it is not reimbursed at

closing for prepaid property taxes.

6\. All sales are on an as-is basis and are for cash only.

Payment is due at closing.

7\. HUD\'s standard special warranty deed shall be used.

8\. All properties must be inspected for defective paint

surfaces before offering them for sale. If defective

paint surfaces are found, treatment as required by 24 CFR

35.24(b)(2)(ii) and specified in HUD Handbook 4310.5 shall

be completed by HUD before closing the sale of a property.

Thereafter, where applicable, purchasers must sign and

date the special \"Notice to Purchasers and Renters of

Housing Constructed Before 1978\" prior to executing form

HUD-9548, Sales Contract.

9\. Discounts on sales to nonprofit and government agency

buyers shall be handled on the Sales Contract and HUD-1 as

follows:

a\. Direct (Non-Competitive) Sales. Since the purchase

price on these sales is the full list price less the

discount (10 percent in non-revitalization areas; 30

percent in revitalization areas), the discounted

price shall be the amount shown on Line 3 of the

Sales Contract. This same sales price figure will be

reflected on Line 101 of the HUD-1. Should the buyer

qualify for an additional discount of five percent

for purchasing five or more properties simultaneously

and closing those sales simultaneously within the 60

day time

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5/94 10-24

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4310.5 REV-2

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frame (non-revitalization area only), the additional

amount shall be reflected and identified by the

closing agent on Lines 207 and 507 of the HUD-1.

b\. Competitive Sales. Since competitive buyers are not

obligated to bid the full listing price, and

nonprofits and government agencies must be the

highest net bidder (without the discount being

considered) to be awarded the contract, the discount

(same percentages as above) is not reflected on the

sales Contract, but is shown on Lines 207 and 507 of

the HUD-1. If the buyer is eligible for an

additional five percent discount as indicated above,

Lines 207 and 507 shall reflect the full 15 percent

discount and the closing agent shall explain this

item on the HUD-1.

G. Reporting. A SAMS report has been developed to measure the

results of sales to nonprofits and government agencies on a

monthly basis. It will show the number of sales accepted and

closed, and whether HUD\'s acceptance occurred during the

priority period for these buyers or whether they occurred

during the competitive period. It will distinguish between

sales in revitalization areas and those outside revitalization

areas. Accurate data depends upon proper programming of the

property as a direct sale, if applicable, and proper

recordation of sales information on the CM DS OA.

10-21 Sales to General Public. Properties which remain unsold after

progressing through each of the required steps are then offered to

the general public under a competitive bidding process. General

public is defined as nonprofit organizations, government agencies,

owner-occupants and investor purchasers.

A. Unless conditions have changed which affect the previously

established price or terms, properties shall be offered at the

same listing price. If conditions dictate, a new listing price

may be established, using current pricing procedures. If a new

listing price is established, the property remains in the

general public category under the normal ten (10) day

competitive bidding period.

B. After properties have been exposed to the market in the

\"General Public\" category for 30 days, homeless providers may

request the property on a lease basis.

10-22 Counter Offering. The counter offer procedure may be used at the

discretion of the Chief Property Officer in situations where the

only bids received on a property are below the range HUD would

normally accept Negotiations are to follow the 10-day simultaneous

offering period. Negotiations should not preclude properties from

going directly to an extended listing period. All bidders who bid

unsuccessfully during the 10-day bid period as well as any who

submitted a bid during the extended listing period must be included

in the negotiations.

A. Follow these steps after the 10-day bid period has expired:

1\. Establish a net acceptable price that is not lower than

the minimum thresholds established by Headquarters.

Document this acceptable price in the property case file

using the Record of Negotiations, form HUD-9429, (Appendix

53). Field Offices must be satisfied that any negotiated

counter offer amount does in fact represent HUD\'s estimate

of current fair market value.

2\. Reject all offers received during the 10-day period and

return the earnest money deposit.

3\. Immediately contact by telephone all individual bidders

and/or their brokers and advise that:

a\. Their offer has been rejected as unacceptable.

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10-25 5/94

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4310.5 REV-2

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b\. HUD would be willing to accept an offer equalling the

predetermined net acceptable price.

c\. The bidder must submit an acceptable form HUD-9548,

Sales Contract (Appendix 39), and earnest money

deposit within a designated period of time to be

determined by the Field Office.

d\. A counter offer bid opening date and time must be

established to coincide with the extended listing bid

opening. All counter offers and extended listing

bids received on the same day shall be considered to

have been received simultaneously and should be

opened at the same time to determine the acceptable

offer.

e\. If an acceptable offer is received from another

party, prior to the receipt of a counterofferor\'s

signed contract and earnest money, the earlier offer

will be accepted, thus terminating negotiations.

f\. If an offer is not received within the specified

period of time, the property will be reprogrammed and

readvertised, thus terminating negotiations.

g\. HUD will accept the highest net offer it receives

which meets or exceeds the acceptable price,

including offers presented during the extended

listing period.

4\. Negotiations must be recorded and filed in the case

binder. See Appendix 53 for information required.

B. Offers During Extended Listing. An offer which is received

during the extended listing period, while negotiations are

underway, shall be handled as follows:

1\. If the offer is the highest net received both during the

bid period and the extended listing period and is equal to

or above the amount specified in HUD\'s counter offer to

the prior bidder(s), it will be accepted without

negotiations. Negotiations with the remaining bidders

shall be terminated and they shall be advised that an

acceptable offer was received.

2\. If the offer is less than the amount HUD will accept, that

bidder shall be given the opportunity to be included in

the negotiations.

C. Other Considerations.

1\. All bidders must be included in the negotiations. It is

not permissible to negotiate with only the high bidder or

the top two or three bidders.

2\. Any counter offer proposed or ultimately accepted by HUD

must be greater than any previously rejected offer.

3\. If tie net bids are received at the same time, award must

be determined by the drawing of lots.

4\. SAMS must be updated to reflect any accepted offer by

completion of the CM DS OA, Sales Offer Accepted screen.

See SAMS User Manual, Case Management Subsystem, for

details.

5\. Office Managers or their designees at or above the level

of CPO must periodically review the negotiation process to

ensure its proper operation. Such reviews shall be

documented in writing.

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5/94 10-26

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4310.5 REV-2

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6\. Offices are cautioned about negotiating with multiple

bidders. Multiple bids significantly below the listing

price probably reflects an error in the pricing. If

initial price is a problem, the property should be

reanalyzed and readvertised.

10-23 Underwriting activities may be handled by the Underwriting Staff
in

Housing Development or by a Direct Endorsement (DE) lender. Where a

case is rejected by HUD mortgage credit processing, and the CPO

disagrees, the matter can be taken to the Office Manager for

resolution. The Field Office Manager must make the decision whether

to use Direct Endorsement processing for Single Family Property

Disposition properties eligible for FHA insurance. While it is not

mandatory, the use of Direct Endorsement (DE) is encouraged since it

will save HUD staff time in financially qualifying the prospective

purchaser. If a decision is made in favor of using a DE lender, the

Field Office must inform the local lenders that this procedure is

available.

The form HUD-9548, Sales Contract, (Appendix 39), when signed by

HUD, is the conditional commitment for the property and the agreed

purchase price on the property (Item 3) is treated as the estimate

of value. The DE underwriter is not responsible for any valuation

review of these properties. A DE case is to be processed as

follows:

A. Issue a Notice of Contract Acceptance - HUD Property

Disposition Sale (Appendix 52) and send it to the broker along

with the purchaser\'s copy of the accepted Sales Contract.

Prepare this Notice on Field Office letterhead.

B. The broker must provide a copy of the acceptance notice and

signed contract to the DE lender, who must review the

acceptance notice to make sure that the property is eligible

for an FHA-insured mortgage. In addition, the DE lender will

qualify the prospective purchaser with regard to financial

ability to make the payments required under the mortgage.

C. Instruct the DE lender as to where the completed and approved

loan package is to be forwarded for closing. Upon receipt of

the closed loan package from HUD\'s closing agent, the DE lender

will review and certify the loan package and submit it to HUD

for endorsement.

10-24 Sales with an Insured 203(k) Mortgage.

A. Successful bidders will be given 60 days to close the 203(k)

insured loan. Sales contracts involving this type of sale

require the inclusion of the following clause:

\"The purchaser agrees to make all additional improvements

required by HUD or the lender, provided the improvements are

intended to bring the property into compliance with the

Requirements for Existing Housing in HUD Handbook 4905.1. The

purchaser must submit the architectural exhibits to HUD or the

Direct Endorsement Lender within 15 days of contract acceptance

or be subject to forfeiture of the earnest money deposit if the

property transaction does not close.\"

B. After the contract acceptance by HUD, the selling broker should

arrange to have the utilities turned on in the purchaser(s)\'

name to ensure the working condition of the heating, plumbing

and electrical systems. If the utilities are not turned on for

inspection, a 15 percent contingency reserve will be required.

If the utilities are subsequently turned off, the purchaser is

responsible to notify the HUD Field Office and rewinterize the

dwelling, if necessary. All costs are borne by the purchaser.

C. To eliminate the need for double closings, an extension to the

sales contract may occur beyond the 60 day time frame; however,

non-refundable fees will be required by the HUD

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10-27 5/94

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4310.5 REV-2

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Field Office as a condition for granting an extension unless

the failure to timely close is the fault of HUD or a Direct

Endorsement (DE) lender.

D. If HUD determines at a later date that the property is not

eligible for 203(k) insured financing for reasons beyond the

control of the purchaser, the purchaser will have the option to

have HUD refund the entire earnest money deposit and any

extension fees or continue the sale without the benefit of any

FHA insured financing.

10-25 Repairs that Delay Closings (applicable to any type of sale). In

those instances where a sales closing is delayed due to the

requirement by the lending institution that minor repairs be

completed prior to settlement, HUD will perform such repairs,

however, the purchaser must assume responsibility for the cost of

the repairs at the time of the sales closing. Minor repairs are

defined as those which do not exceed \$500.

10-26 Damage After Contract Acceptance.

A. Field Offices may perform repairs necessitated by vandalism,

theft or other damage that occurs after acceptance of a sales

contract, but prior to sales closing as follows:

1\. Insured Sales

a\. Damage resulting in property no longer meeting the

intent of the Minimum Property Standards (MPS):

At the option of the Field Office and if it is

determined that repairs would be in HUD\'s best

interest, repairs may be performed to return a

property to a condition which would meet the intent

of the MPS. Repairs may include both MPS and

non-MPS items. If the Field Office chooses not to

repair the property, the sale should be canceled and

the full amount of the earnest money deposit

returned.

b\. Property damaged but still meets the intent of the

MPS:

The purchaser may accept the property as-is with a

purchase price adjustment, as determined by the Field

Office, or cancel the sale with a full refund of the

earnest money deposit.

2\. Uninsured Sales. Properties damaged after execution of a

sales contract but prior to closing generally will not be

repaired. However, at HUD\'s sole option, Field Offices

may reduce the sales price as a result of the damage. The

purchaser may accept the property as-is with a purchase

price adjustment, as determined by the Field Office, or

cancel the sale with a full refund of the earnest money

deposit.

B. Repairs are limited to properties being sold with FHA insurance

and both MPS and non-MPS related items may be included.

C. Adjustments to sales prices on insured sales relate only to

non-MPS items; on uninsured sales, to any damaged item.

D. The exact condition of a property on the date of contract

acceptance, particularly on uninsured sales, is extremely

difficult to know. To lessen the possibility of conflicts,

brokers and the public should be advised that the absence of a

documented walk-through inspection just prior to closing will

preclude any consideration for repairs or price adjustments,

according to this policy. Under no circumstances should this

authority be construed as warranting properties.

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5/94 10-28

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4310.5 REV-2

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10-27 Occupancy Before Closing. Occupancy of a property by the purchaser

before sales closing is prohibited, except where authorized on a

case-by-case basis under the following circumstances:

A. When the sales closing is delayed at for a lengthy period of

time.

B. When failure to permit occupancy would create an extreme

hardship on the purchaser;

C. Where permission to occupy is necessary to meet competition; or

D. Where occupancy would protect the property against vandalism

and theft.

In all cases, the property must be habitable.

If occupancy before closing is permitted because occupancy by the

purchaser would protect the property against vandalism and theft,

occupancy will be rent free or at a nominal rate in exchange for

caretaker services which the buyer agrees to perform. In this case,

the following is to be entered after paragraph one of the standard

lease, (Appendix 29):

\"(h) to safeguard the property against vandalism and theft.\"

Also, add a new paragraph 14 to the lease, as follows:

\"Tenant agrees to close the sale in accordance with the terms

of the Sales Contract, which he/she executed, at the date

and time established by the Seller. Failure to do so will

constitute a breach of that contract. Tenant further agrees

that if he/she does not close the sale on the date and time

established by the Seller, he/she shall then commence the

payment of rent of \$ \_\_\_\_\_\_\_\_\_ per month until the sale is

closed or will vacate the premises at the request of the

Seller. No repairs are required to be made by Seller. Tenant

agrees to assume the risk of loss if the property is damaged

before sales closing.\"

If occupancy is solely to meet needs of the purchaser, fair market

rent must be paid and the purchaser must assume the risk of loss in

the event there is damage to the property before sales closing. In

either of these two cases, use the standard lease (Appendix 29).

See paragraph 10-25 for repairs that delay closing.

10-28 Direct Offers from Purchasers. Encourage prospective purchasers to

use brokers; however, Field Offices may, at their discretion, allow

direct offers from purchasers without the use of brokers provided

the following requirements are met:

A. Purchasers must complete the Direct offer Certification

(Appendix 50) and submit it with the form HUD-9548, Sales

Contract (Appendix 39).

B. Do not accept direct offers from purchasers who cannot or will

not complete the Direct Offer Certification.

C. Field Offices must use extreme caution in providing lock box

keys to non-brokers if such a practice is allowed.

D. If REAMs are used to show properties to direct offer

purchasers, Field Offices must amend the REAM contract to

provide a reasonable fee so that HUD will not be liable for a

full sales commission to the REAM.

10-29 Special Categories of Purchasers.

A. Displaced Persons (defined as any household (family or

individual)) that moves

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10-29 5/94

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4310.5 REV-2

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permanently as a direct result of: (1) acquisition,

rehabilitation, demolition or code enforcement for a government

(Federal, state or local) project or government-assisted

project, (2) a determination that the income of the household

exceeds the limitations for the government-assisted housing

that the household occupies, or (3) a major disaster. For

details on renting to disaster victims, see Chapter 7. This

definition applies even though the displaced person has found a

temporary residence.

1\. At the discretion of the Field Office Manager, properties

which are eligible for insured financing may be offered

for sale at a discount of ten (10) percent off the listing

price to displaced persons for 10 days prior to public

listing.

2 Offer only those properties in the general area in which

displacement is occurring.

3\. Accept purchase offers only from displacees who will be

owner-occupants and who include with their offer

acceptable certification that they are or will become

displaced as defined above.

4\. Purchase offers submitted by displacees must be at the

property\'s listing price, with no more than the customary

charges for financing and closing costs.

5\. Procedure.

a\. Notify appropriate government agency that the

property will be available for 10 days prior to open

listing, provide a copy of the upcoming listing, and

state that offers will be considered on a first-come,

first-serve basis.

b\. Displacees accompanied by a broker or representative

of the displacing agency may inspect the property

during the 10 days.

c\. If the displacing agency simultaneously submits more

than one purchase offer, any priority system will be

determined and administered by that agency.

d\. Backup offers may be retained with the consent of

the submitting persons.

e\. Credit reports and verification are required as for

other purchasers and must be submitted directly for

HUD\'s mortgage credit approval. Costs for the credit

report will be reimbursed only to the successful

purchaser at closing.

f\. Sales commission will be paid to the selling broker

at closing: no commission is paid on sales made

directly through the displacing agency.

B. Sales to Tenants/Right of First Refusal:

1\. Upon execution of the standard lease (Appendix 29), HUD\'s

tenants in occupancy, except former mortgagors and tenants

of governmental agencies or private nonprofit

organizations leasing from HUD, must be provided with

written information affording them the Right of First

Refusal to purchase the property non-competitively prior

to its being listed for sale. Field Offices should

distribute the Letter to Tenant - Right of First Refusal

(Appendix 69) to all tenants upon execution of the lease.

Tenants in occupancy will be offered the right of first

refusal to purchase, provided:

a\. There is a recognized ability to acquire financing:

b\. A good rent paying history exists; and,

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5/94 10-30

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4310.5 REV-2

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c\. A request has been made to HUD to be offered the

right of first refusal; or

d\. State or local law requires that tenants be offered

the right of first refusal. (See paragraph 2-14 A.

for prohibited evictions.)

2\. An inspection must be made to determine the appropriate

market approach and current fair market value. The tenant

would then be given the opportunity to submit a sales

contract to the Field Office under a non-competitive

bidding period at the current fair market value. The

tenant is eligible to have the financing and/or closing

costs paid by HUD on the same basis as for other

purchasers. A selling broker is not involved, therefore,

no sales commission will be indicated on the sales

contract.

3\. Should the tenant elect not to purchase the property, the

Field Office may require that the property be vacated

prior to offering it for sale under the normal competitive

bidding procedures.

4\. Former owner-occupant mortgagors shall not be given the

right of first refusal to purchase their former property.

However, they may submit an offer under the simultaneous

competitive bidding period. Former non-occupant

purchasers are ineligible to repurchase the same property.

C. Salaried Employees of HUD. Sales to such employees must have

prior written approval of the Director, Office of Insured

Single Family Housing, Headquarters. Because of the obvious

sensitive nature of such sales, the procedures which follow are

intended to be highly restrictive so that no questions may be

raised with regard to the integrity of the transaction. Any

request for approval, which is to be submitted by the Office

Manager, must include verification that these conditions have

been met.

1\. The property must be listed on the open market for 15

consecutive days (10 day listing period plus five days

under the extended listing period) before employees may

submit offers. Pre-approval to submit offers is not

possible. Do not accept offers to purchase from employees

unless the 15 day requirement has been met. It is

intended that employees or relatives of employees not be

in competition with the general public during this period.

In the event other offers are received under the extended

listing period on the same date (but after the fifth day

of extended listing) as the employee\'s offer, the property

will be awarded to the individual(s) submitting the offer

providing the greatest net return to HUD in accordance

with HUD\'s best offer procedure.

2\. The offering price must meet or exceed the current listing

price and be submitted through a real estate broker if

this is the usual practice of the Field Office. The best

offer sales procedure will be used. The costs specified

in the offer must be in line with such financing costs

paid on other sales and only actual costs will be paid.

3\. A determination that the employee has a need for such

housing and suitable housing at a similar price and terms

is not available from other sources.

4\. The employee must provide a statement that the property

will be maintained as the primary residence and is not

being purchased for financial speculation.

5\. The employee\'s credit risk pattern must be satisfactory

where HUD insured financing is involved.

6\. The employee must not have been involved in any way with

the preparation of

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10-31 5/94

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4310.5 REV-2

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reports, findings, or recommendations regarding the sale

on which he/she has submitted an offer.

D. Relatives of Salaried HUD Employees. Relatives are defined as

persons related by blood, marriage, or law. To the extent that

an employee learns or has knowledge that a relative is

attempting to purchase a HUD-owned property, and such property

is located in the Field Office jurisdiction where the employee

works, all provisions of paragraph 10-19 C. apply.

Additionally:

1\. The employee must notify the Office Manager in writing

that a sales offer has been submitted by a relative,

identifying the property and the relative.

2\. The employee must not have been involved in any way with

the preparation of reports, findings or recommendations

regarding the sale on which a relative has submitted an

offer. If the related employee has already prepared

materials regarding the sale, the Office Manager shall

order new reports to be prepared.

3\. The Manager must take all necessary precautions to ensure

that sales to such relatives will not involve or appear to

involve preferential treatment.

E. Offers Made by HUD Contractors who prepared reports used as the

basis for the listing price and/or the recommendation of

acceptance, will not be considered. In accordance with the

REAM contracts, the REAM contractor is prohibited from

purchasing any HUD properties managed under their contract.

This prohibition extends to members of the contractor\'s

immediate family or household or by any entity in which they

have any direct, indirect or financial interest.

10-30 Sanctions Against Fraudulent Purchase. The following applies when
a

condition of sale was that the purchaser be an owner-occupant.

A. When a person has purchased, within a short time, at least two

HUD-owned properties before taking occupancy, he/she must be

requested to explain these transactions in person or in writing

to the Field Office.

B. He/she shall be notified that all future offers submitted will

be processed as offers from an investor if:

1\. There is no response to the Field Office request in

paragraph 10-30 A, above;

2\. The explanation in response to paragraph 10-30 A does not

evidence good faith in the stated intent to occupy the

property.

C. Each case must be fully documented. Decisions to process each

future offer as an investor offer must be in a permanent record

for HUD staff who classify offers.

D. False certification by a purchaser concerning occupancy of

single family properties financed by an insured mortgage is a

violation of 18 U.S.C. 1001, which may result in the required

prepayment of the mortgage in the amount of the difference

between the downpayment made and the downpayment required if

the loan had been processed as an investor purchaser loan, or

in criminal prosecution.

E. When the Field Office suspects misrepresentation, it shall

notify the Office of the Inspector General, pursuant to

Handbook 2000.3 REV-3, Office of Inspector General Activities.

Persons subsequently debarred or suspended under 24 CFR Part 24

will not be eligible for an insured mortgage and HUD will not

pay for or credit closing costs in connection with sales to

those individuals. If the individual is a selling broker in

any future sale of an acquired home property, HUD will not pay

a commission.

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5/94 10-32

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4310.5 REV-2

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SECTION V - PROCESSING REQUIREMENTS FOR SAMS

10-31 General. See SAMS User Manual for specific procedures relative to

listing properties for sale, logging-in bids received, opening bids,

and acceptance of the sales offer.

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10-33 5/94