HUD-Owner-Occupant Rules?

41 Replies

Hi all...

Just a question for the vets....

I understand that when you BID as an "Owner-Occ", you have to actually occupy the home for @ least 6-12 months BEFORE refi'ing or selling.
And when you BID as Investor and win, you can do whatever, immediately. Refi, Sell, etc.

Okay, got that, but how does HUD know whether or not, you are ACTUALLY living in the place? Do they send the HUDPD out to your door, kick it in, and get proof? It says OO but since I am making payments on the prop, doesnt that entitle me as OO?

Thanks in advance... :mrgreen:

"Big players, make Big plays.."
-John Madden

I work for a HUD vendor. (I don't work on the HUD contract, so my information was aquired in convrsation, and I've not read the register). You sign an affidavit that you are the owner occupant. The HUD Inspector General has the right to inspect owner occupants. If you are caught giving false information, it is a felony. I've been told they are much more vigilant on the Good Neighbor Next Door (GNND) program.


You will get caught, because investors like me watch these homes every week, waiting for the OO period to end. As an example, I was watching a vacant home for 16 months that had an orange tag on the door, waiting for it to come up on HUD. It came up and the listing price was extremely high,

I checked the following week and someone purchased the home during the OO period and the broker is a guy that mainly deals with investors. I waited 2 more weeks and the owners name was updated on the county web site. I ran a query on the owners name and he already owned a home in another town.

They have been rehabbing the place for 4 months now, but trust me, if I see a for sale sign go up on that house or find out that the owner is not living there after rehab, the owner and the broker will be in hot water. I have a personal vendetta against the broker who made this deal any way, because he is shady and some how he beats me on a lot of deals.

I want to know everything about my market. Who is selling and who is buying at what price and who are the players involved. This is my competition, so I need to know everything about them. Just keep in mind that you never know who is watching and it's not worth the risk. Wait until it moves to the All bids period.

I know this is an older post but, I was waiting for the all bidder to hit a house in my area, even had the bid ready to be submitted on the morning of, but luck would have it sold to during the owner occupant period, fast forward four months and a week and I see that the property hit the market this morning with bathroom updates and a large increase in listing price. Not sure who is watching the store at HUD.

I do not mind when an owner gets these properties, thats the purpose of the waiting period, but when the property goes to a flipper under false pretenses it can get frustrating. Just venting, not much I can do about it now.

I do the exact same as @Tom C in my target market. I will records all of the OO sales on properties that I would have bid on and then drive by them periodically after they close. If I see a dumpster in the driveway the day after closing, you pretty much know its an Investor. Once the rehab is complete, I look for the property for sale or for rent and report them. I will say that the overwhelming majority of Investors in my target market play by the rules when it comes to HUD homes. Its usually some newbie that gets frustrated getting outbid repeatedly that crosses the line...

I know it's old but I have a question about HUD owner occupant. who has it occupy as an owner occupant? Do all parties on the tile have to occupy or can just one occupy for the 12 month period?

Is there somewhere official that spells this information out? I've been searching and under stand that there is a 12 month owner occupancy requirement. But say two people want to buy the house together but only one will live in it for the full year how would HUD look at that? both names would be on title and one of those people would live there for over a year then buy out the other person? thoughts?

I have been selling HUD homes for 21 years. I even teach seminars on this very topic. so here is the deal.....IF you purchase a HUD home with the intent of flipping is what you need to know. The title is flagged. If you try to sell it before your one year mark, the title company will tell you that there is a lien - A government placed lien for one year. You will not be able to sell it and you will be subject to a $250K fine and or 5 yr felony imprisonment. Its like selling your welfare card for drug money. Government abuse comes in many forms. The owner occ. form asks if you have purchased a hud home in the last two years as an o/o? Then it clearly states "This offer is being submitted with the representation that I/we will occupy the property as my/our Primary residence for at least 12 months." I hope this helps. - Signed HudQueen of Tampa

@Cally Doyle

That is absolutely not true in the Denver region and I have not heard it mentioned in your region either. Hud does not use deed restriction like FNMA and never has.  A lien cannot be created to expire after 12 months as a lien has to be released 

@John Rogers I assume you have never heard of this as well selling HUD homes in Florida ?

FNMA makes you initial in their addendum what you can resell for and what that limit is. HUD does not do that, that is absolutely true. THere is NO where on the HUD 9548 Sams contract or any addendums that state that. However, that owner occupant form clearly states the penalties. I have seen brokers try to flip them and fill out false O/O forms. They are no longer in business.

@Cally Doyle

The Denver Region oversees HUD home sales in Texas the same way the Georgia region oversees sales in Florida. It has zero to do with liberal or progressive. I responded to your assertion that HUD created a lien that would be picked up by the title company. That is not accurate and does not happen.

Can someone answer me this? 

I want to buy a HUD home for my first property, live in it for a year and while living in it for that year rehab and work on it. Once my year is up, i put it on the market and get my profit.

I also want to know more about how prices are put on HUD homes. Is it the mortgage that is left to be paid? How do you understand a good deal? I look at the comps and neighborhood of recently sold properties but is there any other ways?

Please help!

has anyone ever been prosecuted for violating this clause? And if so wouldn't HUD have to prove without a reasonable doubt the owner intended the fraud ? Just curious if anyone has ever called HUD and of they actually investigated the property and what happened after.

Does anyone know how soon the owner needs to occupy the property? I tried searching for this, but all I could find is that under the Good Neighbor program, it could be 30, 90, or 180 days that you have to actually move in after closing (depending on repairs needed). I am looking at a normal HUD in OO period (not Good Neighbor) and I don't see anywhere stated in the contract package a certain number of days required to move in by, just that you have to occupy it for at least 12 months.

Originally posted by @Angie B. :

Does anyone know how soon the owner needs to occupy the property? I tried searching for this, but all I could find is that under the Good Neighbor program, it could be 30, 90, or 180 days that you have to actually move in after closing (depending on repairs needed). I am looking at a normal HUD in OO period (not Good Neighbor) and I don't see anywhere stated in the contract package a certain number of days required to move in by, just that you have to occupy it for at least 12 months.

 Angie, you would have 60 days to take occupancy. Technically your 12 months clock doesn't start til you actually move in but that's not really something they can watch for. Keep in mind if you go, for example fha with a repair escrow you have a timetable to fix the items (pretty sure 90 days) and they will come back and check on the repairs. Also, for what it's worth hud is a whole different animal then most other sale types, it's pretty important that your lender, title company, and Realtor are well versed in hud dealings. Your Realtor will know the details of these steps and time frames.

Thanks, @Matt Turbitt , in this case I am the realtor! But I am still a newbie agent, although we've purchased HUD homes, bank REOs, Fannie, Freddie, etc, before, so not as new as an investor. Here is what makes this case different- we are paying cash as an owner occupant. Not too common maybe, but HUD doesn't require the 60 days occupancy- I finally got a response back from the listing agent after going over the contract package several times. They only require 12 months like you mention. The 60 days often comes into play with a mortgage on a primary residence. The lender requires you to occupy within 60 days. HUD is silent on the issue (at least as far as I can tell). Maybe this has changed in recent years, but at least that is what I am finding today.

The reality is you are correct that HUD has no absolute rules regarding being an owner occupant other than the addendum you sign with the contract package stating that you will occupy for 12 months . The HUD minimal enforcement division only acts on complaints and with that very few. Now if someone owns a $500,000 house and buys a $50000 house as an owner occupant and someone files a complaint attention will be drawn. Being an agent can also draw more scrutiny by fellow investors. Hopefully you will owner occupy the property and only push the envelope as far as you are willing to defend

Absolutely @Greg H. !  We do intend to occupy it (if we even win the bid- this is all hypothetical at the moment), we just were trying to figure out the timeline on getting our current property ready to sell, and what would be easier to work on while still living here vs. after moving across town.  We usually buy investment properties to rent out rather than to live in, and wonder sometimes if all those deals we miss out on because they went owner-occupant were legit.  So it is nice to finally run across something that made us want to move and taken advantage of the O/O status!

Thanks all for the useful info...same topic, additional questions--hopefully this is an okay place to ask them!

Here's the deal I'm looking at right now: I own my SFR and two duplexes in one town, but I've been trying to find a way to move across the state for a while now, and my day job will actually allow me to do it. I've just found a HUD home with good potential up for sale in an area full of rentals for a great price (agent expects it will be competitive bidding...). When I move, I will rent out my current SFR also since it will cash flow nicely. Due to circumstances, I can't move until after Memorial Day, but I could make regular trips to my "new home" across the state to work on it, moving full time this summer (hopefully in a much more livable state then anyway!). My questions are:

1. Will I be in trouble if it takes more than 60 days to do the rehab since I will be commuting across the state to do it (technically, one of my sons could live there full time...after the plumbing works anyway)? I might be able to "live" there more than 50% of the time, but I will miss my wife.. :(

2. Can one of my sons be the "owner occupant" if we all move into it together, but then he stays and we move out to a different property before the 12-month period is up?

3. Does anyone know if it is legal to refinance a HUD purchase if you paid cash before the 12-month period is up? I'd like to recoup expenditures as soon as possible...

4. Does my situation raise enough red flags that I should not pursue this?  I don't want to push the envelope as I am only a part time investor just getting started.  I prefer to avoid any and all legal trouble (please don't call on me if you see the dumpster there right away!).

What I'm doing would be very similar to what I did with the place I live in now, only my current home was purchased at deep discount from an estate, and held longer before refinancing and renting it out...

Thanks for any advice you can offer!