Posted by Matt (MPD) IL on May 09, 2003 at 01:43:19:
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I can’t say for certain in other areas of the country but in the Midwest region here is the typical case.
Golden Feather, acting as HUD’s agent, lists all properties for sale. For the first 10 days they will accept bids from “Owner Occupants”. If there are no acceptable bids by the eleventh day it is opened up to “All Bidders”. If someone does bid but for whatever reason is unable to perform (meaning they can’t close) the property will get re-listed and for the first 5 days back on the market is again “Owner Occupied”. Also, if a property gets a price reduction while waiting for acceptable offers it becomes a re-listed property and the same 5 day owner occupied period applies.
In my town properties almost never make it to the “Daily All Bidders” stage as they either get bought up by true “owner occupants” or investors bidding as owner occupants. By bidding as owner occupant you are agreeing to live in the property as your primary residence for at least the next 12 months.
On occasion there have been investors who have bid owner occupied which is a clear violation of the contract. I’m told that there are very stiff penalties for lying on a HUD purchase, i.e., $250,000 fine or up to two years in jail.
I do know of investors that got caught in this lie but have yet to see anyone get fined or imprisoned. I’m told that there have been some people jailed although it didn’t happen in IL to the best of my knowlege.
Your point about owner occupants buying a property that isn’t fit to live in is a good one, although I’d question, why don’t you think that someone who will end up living in the property can’t go about hiring contractors to fix them up prior to moving in? Typically I’ll assume most end buyers don’t go looking for properties that need extensive repairs, however there are plenty of “one at a time” investors who do just that. I have known many people that live in a house while they rehab it. Some may take a year or longer even.
In any case, if you plan on buying HUD make sure you check the rules in your area. If you look at Golden Feather’s web page there is plenty of info regarding where you live I’m certain. Their FAQ should also answer most of your questions.
Matt