HUD home sold to investor during exclusive! wtf?

19 Replies

we looked at a house a few months ago and we where going to put a bid on it, but it was only open to owner occupants. My Realtor called the listing Realtor and they said they aren't taking bids from investors and have current bids for oo.  It sold a couple days later at the end of the exclusive period. 

So I go through the neighborhood today and there is a for rent sign in the front yard. Wtf. How can they do this. I couldn't even put a bid in. 

I don't like "telling" on people but this is clearly against HUD rules. I also believe that if you can't invest legally, you shouldn't do it. And I also wanted the house. What would you guys do? Let it go?

First, you said it sold "at the end of the exclusive period". So, do you Know they offered during the OO period, as an OO? If so, yes report them to the HUD fraud hot line.

If they truly bought it under OO terms I would absolutely report them. HUD takes these reports seriously.

A call from your agent to the listing agent might clear things up as the listing agent would have a copy of the HUD contract and look to see if it is Owner Occupant or Investor

Any Investor bid after midnight on the deadline that was acceptable to HUD would be accepted if no Owner Occupied bids were acceptable. So after "a couple of days" it could be long gone to an investor

Take a picture of the for rent sign and see if they have the house listed for rent anywhere.

My realtor caught someone that put a bid on a house as an owner occupant and got it. Then they bragged to some other investors (one of which was my realtors - but not me) about what a great deal they got.  Needless to say, my realtor's investor were furious.

She reported it but basically HUD just blew her off. Said that you need to have some evidence that they were renting it out (i.e. a listing or something in the paper or online).

They had zero interest in catching them.

I don't really think they care. To be honest, I don't see why HUD offers the exclusive period anyway. They should be trying to get the most amount of money possible given they're a govt agency.

thanks. I don't know for sure how they submitted a bid as an investor but will be calling my agent. It is now listed for rent on the mls so if they did anything illegal they are being pretty stupid about it. 

@Mike Landry  

Sometimes caution is the better part of valor. There is enough fish in the sea to go catch another fish. Sometimes karma is a *****. And you don't want to be part of "what goes around, comes around". There is so much fraud in the government system. And that leads to the real world process of you don't know what toes you'd be stepping on. Be careful.

I agree with  @Greg Hall I would have your agent dig deeper and see what really happened. 

I list homes for HUD so I might have some insight of what happened.

Offers for HUD properties are submitted on their website and go directly to HUD, the listing agent cannot see the offers in the sealed exclusive period. The deadlines are always posted on the website.

It's possible an offer was submitted after midnight of the last day of the OO period, I see it all the time. This way HUD will open and review right away. Or it could be a case of fraud, which is not acceptable!

I am a hi listing agent as well. Report them if you find out they bid as an owner occ.  

Originally posted by @Mike H.:

Take a picture of the for rent sign and see if they have the house listed for rent anywhere.

My realtor caught someone that put a bid on a house as an owner occupant and got it. Then they bragged to some other investors (one of which was my realtors - but not me) about what a great deal they got.  Needless to say, my realtor's investor were furious.

She reported it but basically HUD just blew her off. Said that you need to have some evidence that they were renting it out (i.e. a listing or something in the paper or online).

They had zero interest in catching them.

I don't really think they care. To be honest, I don't see why HUD offers the exclusive period anyway. They should be trying to get the most amount of money possible given they're a govt agency.

HUD does the owner occupant period because they are a government agency that is supposed to promote home ownership-FHA loans. HUD does pay attention if they can prove there was a violation. My HUD contacts have confirmed they are prosecuting people.

@Mike Landry  

I have witnessed this a few times myself, but have yet to follow through and file a report... a few weeks ago an agent walks up to a flip of mine while I was doing some final clean-up and wants to walk through with her investors. She then begins to brag about the great deal she got on a house a couple of doors down. I knew it had been a HUD property and sold during the OO period.... I inquired how she was able to buy as an investor in such a hot neighborhood... I told her in my experience, all the HUD properties usually go to OOs... She actually laughed .... like I was a sweet niave child.... and told me she and her clients always buy as an OO

She is with a major broker and it is my understanding that the broker's ability to transact with HUD would be terminated as a consequence of her actions....

It seems like HUD lacks the desire or resources to follow-up on the obvious fraud associated with these deals.

My agent told me something similar. Its supposed to be a pretty hefty fine along with possible jail time. And the broker has to sign something as well so that they are on the hook if the buyer is playing games.

That being said. I just do not believe HUD cares. And, to be honest, I don't believe HUD should care. Maybe part of that reasoning is because I don't buy hud houses when they first come to market anyway. Not enough discount early on for the numbers to make sense to me. I need my deals to be sitting about 3 months or more. :-)

But also, if an investor is willing to pay their price, then so be it. Its better than having a house sit vacant because there aren't any owner occupants willing to buy.

And then what happens is the longer it sits, the more risk there is for damage and the more likelihood there is that hud will have to discount it more.

The govt should not be using these homes as some sort of social experiment when the taxpayer is the one footing the bill.  But they obviously saw that issue too and I'm guessing thats why they reduced the Owner occupant period significantly.  It simply made no sense.

In this case, though, I don't see why they need much proof to determine whether an investor is pulling a fast one or not. What they should do is, if they get a complaint, HUD should be required to check that the buyer resides at the new home at some point. And/or that there is an obvious issue (i.e. this guy flips 3 houses a year and has bought 2 houses in the last year as an owner occupant that he's flipped).

It should be fairly obvious. I don't see why they need proof of rental. I think that if a complaint is filed, hud should be able to see that the user moved in to the house after the rehab. If they did not, they need to show the reason why they bought as an intended owner occupant and the circumstances changed so they could not.

The other quick fix to that is that HUD could VERY EASILY put a restriction on the site that you are only allowed to buy 1 house every 2 years as an owner occupant. PERIOD!  So if a deal falls through and the buyer sells and makes up some excuse. They would be prevented from buying 2 more and playing the same game.  One house every 2 years as owner occupant.  

Thats the simplest most obvious fix to that issue. They might still get away with one. But they won't be able to game the system.....

I have seen this happen in my area too. In fact these is one a couple house from one of my parent's rent houses that I wanted to pick up but it sold in the OO period. Within a month the doublewide that was on the lot was moved off and sold at a local used trailer lot and they have the lot for sale for more than they paid for the lot and DW. Not much you can do about it.

Good discussion!

Here is what I did....nothing!

I called my realtor (x realtor) who was pretty clueless. But I did manage to see that the person that bought it payed full asking price. At the time I wasn't going to offer close to full price.  I suspect that an investor either put a full price offer in at 12:01 when the oo period expired or lied about status. 

I've learned a couple of things...use an investment friendly realtor and if you really want a HUD home put an offer in right when the oo period ends.

I'll let karma handle this one. 

Originally posted by @Mike Landry:

we looked at a house a few months ago and we where going to put a bid on it, but it was only open to owner occupants. My Realtor called the listing Realtor and they said they aren't taking bids from investors and have current bids for oo.  It sold a couple days later at the end of the exclusive period. 

So I go through the neighborhood today and there is a for rent sign in the front yard. Wtf. How can they do this. I couldn't even put a bid in. 

I don't like "telling" on people but this is clearly against HUD rules. I also believe that if you can't invest legally, you shouldn't do it. And I also wanted the house. What would you guys do? Let it go?

 It's unlikely the home is sold to an investor during the exclusive period (to owner occupants). The fact that it got sold at the end of the exclusive period means these investors are probably bidding everyday on the property. This is what I do for the HOT deals in my market. 

Account Closed do you mean you are putting in a bid during the exclusive period but saying you are an investor? So at the end of the exclusive period they can see an investor bid also? 

Originally posted by @Mike Landry:

@Wendell De Guzman do you mean you are putting in a bid during the exclusive period but saying you are an investor? So at the end of the exclusive period they can see an investor bid also? 

No - that's NOT what I said. As an investor, you can only BID after the exclusive period. However, I bid daily on a property I want. As soon as the exclusive period is over, I am the first one in line. It's like...how do you get the iPhone 6 when there's a limited supply available? Line up at the store before it opens. Same thing I do but with HUD deals.

@Mike Landry   Smart move, every action doesn't need a reaction. Sometimes you gotta take the high road out. There will be other fish in the sea, keep fishing!

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