While browsing real estate listings, you may run into unfamiliar terms. Here are a few definitions that may come in handy when deciphering listing information.
Short Sale: Also known as Pre-foreclosure or Third Party Approval Required
When the net proceeds from the sale of the home are not sufficient to pay off existing loan(s), the sale is conditioned on approval by the seller’s lender to accept less than the full amount owed. Negotiations may be carried out by the listing broker or an attorney. The term “Third Party Approval” is also used when bankruptcy or other court approval is required to complete the sale.
As-Is Sale: Often used in the case of foreclosures or short sales to warn the buyer that no repairs will be made during the inspection period, or that the seller has never lived in the home and has no personal knowledge of the home’s condition. In actuality, the term has no legal meaning. It does not absolve the seller of legally required disclosures. The term “As-Is” does not necessarily mean that the home is in poor repair. However, the value of a professional inspection is paramount.
HUD Home: Homes that have been acquired by HUD after foreclosure on an FHA insured mortgage.
HUD: US Department of Housing and Urban Development. FHA: Federal Housing Administration. FHA insures loans for low-to-moderate income buyers and others who may otherwise be unable to qualify for conventional financing. Mortgage insurance is included in monthly payments until the home’s value exceeds 78% of the loan amount, at which time the buyer may request to have it removed.
Submission Bid Deadline: When a new HUD home comes on the market, the first two weeks are generally set aside as “exclusive” available for bids from owner occupant buyers. An initial bed deadline is set, after which all offers will be reviewed. If no acceptable bids are received, the bidding continues on a daily basis until an acceptable bid has been received.
FHA Insured Escrow (IE) with $xxx.xx in repairs: When looking at HUD homes, you will see this terminology a lot. Homes that revert to HUD ownership are inspected by an FHA approved appraiser, and an as-is value is set. If no obvious repairs are necessary, the home is deemed (IN) or insurable for FHA 203b financing. When repairs under $5,000 are necessary to meet FHA lending guidelines, the needed repairs will be specified in this way. Repairs are to be completed after closing, using money set aside for this purpose. If the actual repairs cost less than estimated, any additional funds left in escrow will be applied to the mortgage principal. Note that the seller does not contribute funds to this escrow account, it is part of the buyer’s loan. If FHA financing is not used, the repair escrow does not apply.
203K Eligible: When buying a home needing more than $5,000 in repairs, it may qualify for FHA 203(k) Rehab loan program. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. Talk to an FHA approved lender for more details.
HUD homes are listed in the local MLS, however all offers must be submitted through hudhomestore.com by a real estate broker registered with HUD.
FTC: Real Estate Glossary