Are investors bidding on HUD homes illegally?

[Michael Deter]

Hi everyone,

I'm looking to bid on a HUD property in Columbus, OH. It is a 4-plex that is partially rehabbed. Currently only owner occupants can make offers which is great for me since I am looking to purchase a 2-4 unit and house hack.

My agent mentioned to me that even though only owner occupants can bid right now some investors might say they will move in to get the deal before everyone else can bid on it with no intention of moving it.

Has anyone heard of this happening? I assume this would be considered mortgage fraud. I’m trying to understand if I will be competing with all investors or just those looking to house hack.

Thanks for your input!

[Greg H.]

Originally posted by @Austin Steed:

@Greg H. Doesn't HUD want to see that you are owner occupying the property, ie living in one of the units?

@Michael Deter Even if investors are lying about living in a unit I don't think it is worth the risk to me. As you can be fined 250k for doing so. See https://www.investopedia.com/terms/o/owner-occupan.... 

Also just put in a bid on this one for a client. This one is hot in Columbus! 

I was just giving a "real world" answer. The buyer will sign a document stating that they will occupy one of the units for 12 months. There are no deed restrictions or follow up inspections. The reality is that HUD has no enforcement division for this. The way HUD monitors is:

-They track by SS# so a buyer may only by 1 HUD home every 2 years

-They will review loan documents of the buyer prior to closing to determine the loan is indeed an owner occupant loan