Financing in Minneapolis>Question Details

Tom Montalvo, Home Buyer in Leander, TX

I paid cash for a HUD home. Do the owner occupant requirements still apply?

Asked by Tom Montalvo, Leander, TX Sun Nov 18, 2012

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Elizabeth Sibet’s answer
I'll elaborate more as many buyers & Realtors have questions about this confusing policy. If you bid during the "exclusive" period and not the "extended" investor period then one of the forms you sign will be the Individual Owner Occupant Certification (form 9548D which I'll attach as a web reference for a quick look). This certifies signers will occupy for at least 12 months & that they haven't bought a HUD house as an o/o within 2 yrs. The buyer's Realtor also signs certifying they are not knowingly representing an investor and that they explained the penalties for fraud (up to $250k fine and 2 yrs in prison). They take it seriously!

HUD (like Fannie, Freddie, WF, etc.) favors o/o buyers over investors due to HUD policy (Cranston-Gonzalez National Affordable Housing Act of 1990 for starters). The argument is that more o/o buyers will stabilize communities, even though the reality is that they typically pay lower prices in o/o periods than investors with offers on the sidelines as many foreclosure agents have witnessed all too often, leading to other lower appraisals for other listings in the area and depressed values in some extreme cases. But with this policy for those select houses, first-time buyers & move-up buyers actually have a rare "fighting chance" against cash investors.

Many investors bid higher than o/os for single family & multi-family properties. This is especially true in the Twin Cities since our rental & resale markets are so strong right now due to low inventory (as evidenced by the HUD multi-family properties, in particular, that do not sell during the o/o period then sell to cash buyers for $5k to $10k+ over the list price the first day bidding is opened to investors).

Regardless, HUD gives priority to o/o bidders and falsifying information on any form of the Department of Housing and Urban Development is a felony. But if you purchased in the extended period you are free to rent or sell the house at ANY time so hopefully that is the case!

One investor buyer sold an extended period HUD he bought to a cash buyer exactly 22 days after buying it! HUD does NOT have a minimum time restriction to resell like Fannie, Freddie or BOA for 60-90 days, for example, so that is a benefit if a house goes into the extended period if you want to renovate and resell quickly. Hope this helps!
1 vote Thank Flag Link Sun Nov 18, 2012
Bank of America and Wells Fargo
Flag Thu Nov 14, 2013
what is BOA and WF in your reply? Thanks.
Flag Wed Jul 24, 2013
Elizabeth-thanks for your answer. Our situation is this-we bought in a relatively new subdivision with almost all new schools. When we went to enroll our son-surprise-NO programs at all to support autistic kids. He is doing very well in his current school environment so we are thinking of staying in our original area until he finishes high school. To do so means paying for a place to stay for that time. Thought we might offset that expense by renting the house out:(
Flag Mon Nov 19, 2012
I don't wat to give you legal advice, so after you read this, talk to an attorney, or call your local HUD office with questions.

Elizabeth has a great answer. From your response to that answer it looks like your circumstance may dictate a change in your plans, so contacting HUD may "let you off the hook" for the OO requirement.

Also, I'm a stickler for details, and HUD's 9548D states that you will occupy the property as your primary residence for at least 12 months. I can't be the only person who reads that and realises it doesn't say it has to be the first 12 months. Really, that is more of an observation than advice.

Pick up the phone, call HUD let them know you wish to honor your commitment, but you need to do what's best for your family. There are rules, but there are exceptions.
1 vote Thank Flag Link Tue Apr 16, 2013
I never thought about "which 12 months". Thanks Russ
Flag Thu Aug 15, 2013
It depends what you told HUD when you bought it, if you signed a document saying you are going to live in the home and in reality bought it for resale or investment then that is an issue. The same government that owns HUD is the same one that audits your tax return so play nice!!

Jim Simms
NMLS # 6395
Financing Kentucky One Home at a Time
Web Reference:
1 vote Thank Flag Link Mon Nov 19, 2012
what other fees do u pay at closing on a hud house ur paying cash for
0 votes Thank Flag Link Fri Aug 12, 2016
what other fees do u pay at closing on a hud house ur paying cash for
0 votes Thank Flag Link Fri Aug 12, 2016
diagnose with cancer. I need to sell less than 12 months is it possible? Would hud allow for any exceptions
0 votes Thank Flag Link Tue Jan 12, 2016
Help!!! We purchased a Hud home with my step-son. The agreement was that we buy the home and make all the repairs and my step-son would buy us out for what we purchased the house for and the repairs, giving him a chance to rebuild his credit and helping him out.
We purchased the house in March 2013, and the house, well you could not live in it. We gutted the house and started in with the repairs and in Jan of this year we could see the light at the end of the tunnel. We were 99% done all we had to do was put the applaince in. When he moved in without us knowing, when we asked him about the getting loan he said that he had to live there for a year , if we forced a sale of the house we would be fined 250,000 and spend 5 years in prision.
Keep in mind that we have put every penny into the house, my step-son has not done anything. We pay the insurance and the property taxes, plus the cost of the house and all repairs plus brand new applainces. We just want our money back out of the house.
Are we looking at jail time and a fine??
0 votes Thank Flag Link Tue May 19, 2015
Can anyone Define what Owner Occupant actually means in terms of Documentation, since most HUD agreement state you should be OC within 30 days? (i do realize that's more of a formal 2 years OC buyer restriction, and that HUD will probably not be knocking on the door in 30 days)

Does it mean you have to have title in your name and not LLC? Do utility bills qualify? Alternatively, can the property be in the name of LLC but you still get some utilities bills in your name?

I understand that owner occupying a property gives you the tax inventive for a Homestead discount on your real estate taxes. Just you have to occupying the property on Jan. 1st of the new year.

Seems that what qualifies as proof of owner occupation is purposefully left vague, especially if financing is not sought.
0 votes Thank Flag Link Thu Oct 9, 2014
yes they do because ur buying from hud
0 votes Thank Flag Link Sat Apr 26, 2014
Yes. Whatever is in the contract you agreed to.
0 votes Thank Flag Link Tue Nov 26, 2013
The interesting thing about HUD, and other banks that try this, is at the end of the day all you are simply saying is you intend to occupy for 12 month's. "intend" is a pretty loose term, and really there is no way for HUD to enforce this anyways.

For title or financing there is really no obstacle to selling your home less than 12 month's. I just had a client do this and we had zero problems. You just can't buy another HUD property classified as owner occupant for 2 years from the date you bought the original house.
0 votes Thank Flag Link Thu Nov 14, 2013
Wow, Chris. That does not sound like the best or most ethical advice. You will probably not get caught is not a good reason to do something.
Flag Tue Mar 8, 2016
Cash or finance, you are an owner occupant if you are going to purchase the home with the intent to occupy it as your primary residence which you can only have one of. First, see an attorney regarding the legal definition of what would qualify as a primary residence. For HUD's purposes, if you intent is to buy the home, fix it up and then sell it, you are an investor so you will not want to sign the owner occupancy certification. On the HUD 9548-D you will see this terminology Warning: Falsifying information on this or any other form of the Department of Housing and Urban Development is a felony. It is punishable by a fine not to exceed $250,000 and/or a prison sentence of not more than two years.

Best wishes,

Fred Strickroot
Florida Licensed Real Estate Broker
Tampa Bay Area, Florida
0 votes Thank Flag Link Thu Nov 14, 2013
Yes the financing or cash has zero impact on the owner occupant requirements HUD puts out. If it was within the time allotted specifically for this group you will have received a document to sign. You can also confirm with the listing agent too if necessary.
0 votes Thank Flag Link Mon Nov 19, 2012
I do believe that you must honor the OO rule.

0 votes Thank Flag Link Sun Nov 18, 2012
My colleagues are right and you need to read the fine print. You have several layers of legal possibilities in transactions of this sort. Liz, 612-986-4105
0 votes Thank Flag Link Sun Nov 18, 2012
They do apply only if you bought the home in the first 30 days on the market, If it was after that, then you can treat it as an investment property.
0 votes Thank Flag Link Sun Nov 18, 2012
Yes the requirements still apply regardless if you paid cash or got financing. HUD accepted your offer based on the assumption you will occupy, they may have went with a different offer if you were not intending to occupy.
0 votes Thank Flag Link Sun Nov 18, 2012
I bought a house from hud and my mother paid cash. Now I do not want to live in this house. My mother want to move in that house. Can I quit deed to my mother. The is not pass 12 month. Quitdeed is allow with in 12 month?
Flag Wed Mar 9, 2016
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