Investor · West Grove, PA · Member since 2013 · 74 posts · 25 votes
It seems like I am losing houses because of investors lying to HUD and bidding as a owner occ. before the 10 day grace period is actually open to investors.
I know this happened recently because I spoke with the winning bidder as I'm rehabbing the property next door.
So I ask this question.
Am I foolish for being ethical and waiting out the 10 days ?
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
Sort of depends on how you feel about looking over your shoulder, civil/criminal fines and possible jail time. HUD has fraud hotlines that maybe the investor who loses out to you doing this may use.
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
12y
It's a felony if your caught. Up to 5 years in prison, 250k in fines. Plus your agent and his entire office will probably lose their ability to sell HUD homes.
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
12y
@David VanSteenkiste I would do the same thing if I were you. Try contacting the listing agent too. Make sure you have all the evidence you can gather first.
Investor · Lenexa, KS · Member since 2010 · 215 posts · 121 votes
12y
Check out Mark Ferguson's blog I googled the question since i was also curios to the specifics.
Couple things can happen if you as an investor who plans on not occupying the property put in a bid as an owner occupant, they are kind of serious:
All owner occupants sign an Owner Occupancy Certification - certifying that you will be living there - for at least a year. If you happen to falsify this you could:
1.Pay fines of up to $250,000 and some jail time...and
2. The agent/company who helped you make the bid can lose their NAID# and ability to make any HUD bids for any customer in the future. So, your agent probably won't let you do that once they find out that is your goal.
Also, the listing agents are also on the lookout for investors trying to do this.
Oh yeah, and other investors, like the one you just bought a house next to, are also looking at that property, and when they find out you got one and are not living in it, since they were waiting for the "extended period" may not have an issue with turning you in to HUD.
Mark Ferguson's blog has more info on this. In short, you don't want to do it.
that's what I thought ..
It's a shame , as I really wanted this house. Maybe I'll dig for that HUD phone number to ensure this guy doesn't do it again
Please drop a dime on the guy. I'd like to see what happens. $100 wager to anyone interested that says HUD doesn't do anything, other than maybe prohibiting him from buying HUD homes in the future.
Real Estate Investor · Memphis, TN · Member since 2013 · 100 posts · 34 votes
12y
I had this problem when I was trying to buy my first property, which I PLANNED on living in! Incredibly frustrating. We lost out on 6 bids before we landed one (and it ended up being our only Fannie Mae bid, not HUD).
I say call him out if you have the evidence and then let us know what happens. I work with the Homeless Consortium in Memphis. We notified HUD over a year ago that a specific homeless servicing organization is seriously mishandling HUD funds. They still won't do anything about it, and the longer it goes on, the worse it gets. sheesh.
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
12y
@Jenna Stonecipher did you have proof they were mishandling funds? There are a lot of people that make a lot of complaints to HUD. They don't have the man power to investigate them all without proof or strong evidence.
Real Estate Investor · Memphis, TN · Member since 2013 · 100 posts · 34 votes
12y
@Mark Ferguson Yes, we have proof. HUD did and investigation and chose to award them technical assistance instead. That period of assistance is now over and they are in a bigger hole than before. We are all holding our breathe to see what HUD will do and how we as a community can pick up the pieces to ensure their clients are taken care of--if they choose to re-appropriate, that is.
that's what I thought ..
It's a shame , as I really wanted this house. Maybe I'll dig for that HUD phone number to ensure this guy doesn't do it again
Please drop a dime on the guy. I'd like to see what happens. $100 wager to anyone interested that says HUD doesn't do anything, other than maybe prohibiting him from buying HUD homes in the future.
I won't take this bet because, as far as I know, their policy against first time HUD OO violations isn't widely enforced. This is an old audit, but the gist of it is the recommendation is for HUD to drop the 12-month OO requirement.
If someone has information to the contrary, please post a link. Preferable to HUD enforcement policy. And, yes, I know the wording on the OO Certification. It's one thing to state, another to enforce. Also note these are civil issues, not criminal issues. If anyone has a reference case (like a REC Disciplinary Report) please post the details (w/o names may be better).
I don't have a link but I am a HUD broker and get Info from my asset managers who get their info from HUD. It is a felony to bid as an owner occ when you are an investor. It is considered defrauding the government which makes it a felony. Trespassing, making repairs before closing and vandalizing HUD homes are also felonies because it is federal property.
I was at a HUD round table with HUD managers from 1d and national office earlier this year. They said there were no plans to change owner occupant requirements. They were considering changing bid periods, which they did dec 1. They also are considering changing up the asset manager system at some point. With HUD that means about 5 years from now.
I know agents who were listing brokers with HUD that were fired and their entire office lost the ability to sell HUD because they knew investors were bidding as owner occs and the agent did not report it. HUD may only slap the investors hand or they may do much worse. The agents have a ton to lose and I hope investors would think of the consequences their actions can cause to others, not just themselves.
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
12y
I hear you. In my area, what happened (and this was a long while ago) is the broker was taken off the HUD Lender List. That was it. The punishment didn't seem right to me at the time. A few years later, the HUD audit that I posted earlier came out.
@Mark Ferguson So these agents you know... are they in jail? Did they lose their RE license? Big fine? Is there a DOJ press release? HUD press release? News story?
From what I understand (and I am not an attorney... and again this was a long time ago) is that cases were easy for defendants to get dismissed because the plaintiff could not prove monetary damage. In the audit I cite, they even state "...violations do not constitute a monetary loss to HUD."
BTW, I am fine (no pun intended) with HUD and DOJ enforcing their rule(s). I just don't see it happening much. I don't know how often a reported occurrence is prosecuted, but it appears to be minimal.
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
12y
agents aren't prosecuted because they aren't breaking the law, the buyers are breaking the law. The agent losing their NAID number for their office means hundreds of thousands of dollars in lost revenue a year in many cases. HUD doesn't have to prove anything since they are taking their ability to sell their homes away. I would have to check with HUD to see if they ever publicize their actions. They don't exactly publicize anything I have seen.
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
12y
Not to be argumentative, but regarding "agents aren't prosecuted because they aren't breaking the law..." I disagree. 18 U.S. Code § 4 - Misprision of felony clearly states "Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both."
And a licensed real estate broker (or realtor held to a 'higher standard') saying that a client is OO should have enough information through agency relationship to know who is OO vs. NOO. If they don't, then they shouldn't be allowed to bid on HUD property anyway.
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
12y
I agree @Chris Martin , what my point was , is that HUD doesn't have to prosecute agents to punish them heavily. It would be much harder prosecuting an agent and proving they had knowledge. Your right though it would be a crime.
Dallas, TX · Member since 2013 · 4k+ posts · 744 votes
12y
I knew the asset manager that worked at HUD for a long time, and he always let his investor friends have the very best deals, and that is nothing new all asset managers have their friends they help out.
"HUD does not keep us informed on their actions once we notify them of a fraudulent purchase. I can tell you that I have been contacted numerous times by the Office of Inspector General (OIG) during their investigations on properties that we have submitted to HUD. There were 2 in Colorado Springs in the past couple of years that I remember."
Fix & Flip, Wholetailing, · West Columbia, SC · Member since 2013 · 215 posts · 60 votes
12y
What really surprises me is that there is enough room for profit under the 10 day mark for an investor. Even if he mis-represents himself or what have you.
Usually you don't see discounts until around day 60.
I'm shocked there is profit in this for him.
But I do agree rules are rules and we should all play by them.
Mark is very sharp in this area I would trust anything he says.
Hope you can get to the bottom of this.