The Department of Housing and Urban Development (HUD) insures loans issued by the Federal Housing Administration and the Department of Veterans Affairs. They don’t issue the loans; instead, they guarantee and financially back them. If a homeowner defaults on his mortgage loan, the property is foreclosed upon and returned to the lender for resale. As the guarantor of the loan, HUD steps in, and the home is placed on the market for sale with the hope of recouping the outstanding monies owed. Not all real estate agents can represent HUD in the listing of the property, and not all can represent the buyer. The agent’s broker must be HUD registered to represent either side of the transaction.
Get Your Real Estate License
The first step toward becoming a HUD-registered agent is to obtain a real estate license in your state. Placing your license with a broker is mandatory if you are allowed to legally sell real estate. Many sources of information don’t distinguish between a broker and an agent, and it’s important to know that an agent doesn’t have to be a broker to sell property. However, he must work under the umbrella of a brokerage. An agent cannot list or sell HUD properties directly. He can, however, be the designated “signer” of HUD contracts through his broker.
If you are a newly licensed sales agent and want to work on HUD properties, search the HUD database for brokers in your area who are HUD approved.
After gaining further education, a real estate sales agent can become a broker and assume broker responsibilities. The cost of being a broker is higher than that of being a sales agent because of the increase in fees, dues and obligations, but it doesn’t require the agent to have his own brokerage. Many brokers work under another broker while maintaining their broker designation. Most agents who handle HUD properties work under this format.
Following the Money
When a real estate transaction is closed, HUD distributes the funds to the mortgage lender and all parties with an interest in the property, such as a homeowner’s association. Sales agents don’t receive their fee directly from HUD; instead, the brokerage does. The broker then gives the agreed-upon commission to his sales agent. Because governmental money is involved, the brokerage must be approved by HUD to list or sell HUD properties.
Becoming a HUD Listing Agent
Once your broker has attained HUD status by completing the SAMS1111 form, you can start a marketing campaign to funnel listings and sales through your broker. Start small. Phone your local banks or credit unions and ask who they use to list foreclosed properties. Most rely on asset management companies to handle their “Real Estate Owned” portfolio. Developing a list of those companies is vital if they are to become familiar with you as a qualified sales agent.
Apply to the asset management companies and offer to perform Broker Price Opinions for them. You’ll be evaluating distressed properties and houses on the local market to establish a ballpark selling price. The more BPOs you do, the more the asset management company can rely on your expertise. You are building a relationship with an asset manager who can funnel HUD property listings your way.
Selling and Buying Sides
Your broker may have his HUD approval giving him the right to list HUD properties for sale. However, the brokerage representing the buyer must also be HUD approved. Most HUD properties have a commission of 5 percent attached, but if the property is purchased by the broker or one of his agents, there is no commission.
Focus on HUD Properties
Gaining a reputation as an agent who’s an expert in the buying and selling of HUD properties supplements the income from typical real estate transactions. It is a specialized niche opening additional financial opportunities in all real estate markets.