A program that offers educators and emergency responders certain homes for half price, comes with many strings, as one might expect. If you are a teacher or first responder and looking to buy a home, the details of this program are important to know.
A little-known program sponsored by the Department of Housing and Urban Development allows police officers, teachers, firefighters and emergency medical technicians to buy certain homes for half price. But financing these purchases comes with some strings attached.
Called Good Neighbor Next Door, this program deeply discounts foreclosure properties in areas designated as in need of revitalization. The homes are owned by HUD and first offered only to full-time educators and emergency responders who serve these areas. In return, the workers must agree to live in the home for at least three years.
To be eligible, buyers may not own any other residential property or have owned a home within the previous year.
Although the home price is halved, buyers must still be able to qualify for a loan equal to the full price, said John Zubretsky Jr., the owner-broker of Weichert Realtors, the Zubretsky Group in Wethersfield, Conn. The mortgage amount, though, will be only for the discounted price, said Mr. Zubretsky, a specialist in HUD properties.
But in order to make the buyers accountable for the three-year commitment, HUD also requires that they sign a “silent second” mortgage for the amount that the property was discounted. No interest or payments are required on this mortgage as long as the buyer lives in the home for at least 36 months.
“That second note gets ripped up after three years,” said Kevin Kelly, a local listing broker for HUD homes in the Buffalo area. Mr. Kelly noted that HUD does have methods for checking on the residency requirement and has prosecuted buyers who knowingly violated that rule.
Buyers may notify HUD if and when they want to move out before the three years are up, but they must repay the agency for the discounted amount on a prorated basis based on how long they lived there.
Buyers can search for eligible properties in their area at hudhomestore.com. But the listings can be sparse. For example, earlier this month, just two properties were listed for the entire state of New York. One was a three-bedroom ranch in Niagara Falls for $27,000; the other was a two-bedroom ranch in Syracuse, also for $27,000.
The listings don’t come along very often, brokers say. When they do, they are offered under the program for a limited time. If there are multiple buyers for a property, the winner is chosen at random by lottery, Mr. Kelly said. If there are no buyers, the property is offered at full price to any buyer who intends to be an owner-occupant.
HUD notes on its website that buyers interested in properties that need renovation should apply for what is called a 203(k) renovation mortgage through the Federal Housing Administration. Under that program, the price of the home and the estimated cost of renovations are combined into a single mortgage. Warren Foley, an agent who specializes in HUD listings in the St. Petersburg, Fla., area, said he thinks the program is “a phenomenal opportunity” for first-time buyers. But although he said he has received inquiries about it and tells potential candidates about it, his buyers haven’t followed through, usually because of concern about the safety of the neighborhood or the quality of the schools.
“It’s never been a huge program,” since it is limited to certain areas, said Brian Sullivan, a HUD spokesman. Also, the numbers of listings have dwindled in recent years as HUD’s stock of foreclosure properties has declined, he said.
In the 2015 fiscal year ending Sept. 30, 262 homes sold under the Good Neighbor program, according to HUD. That was about half as many as last year, and about a third of the volume in 2013.
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SRC: Read the full New York Times article here: www.nytimes.com/2015/11/29/realestate/hud-homes-at-half-price.html?emc=edit_tnt_20151128&nlid=67237800&tntemail0=y&_r=0