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What is HUD's Repair Escrow?
3 Types - IN, IE and UI
 
You may see a "insured with escrow $___" on a HUD-owned listing - what does that mean? Does the buyer have to pay for that, or is HUD giving that amount back? 
 
Before it goes on the market, a HUD-owned home is appraised by an FHA appraiser. The property is usually listed at the appraised value. The appraiser looks at the condition of the property and determines if, in it's current condition, the home would qualify for FHA financing. Based on that, the home is either: 
IN (Insured), IE (Insured with Escrow) or UI (Uninsured)

IN - Insured
No escrow needed - move-in ready

If the appraiser thinks there are no repairs needed for the home to qualify for FHA financing, the home is considered IN (Insured). Investors have to wait 30 days before submitting an offer.
 
 
IE - Insured with Escrow
Up to $5,000 of repairs needed

If the appraiser thinks the home will qualify for FHA financing with less than $5,000 of repairs, the home is IE (Insured with Escrow). The dollar amount of the needed repairs is listed on the PCS form - found on HUDHomeStore.com on the 'Addendums' tab for that property. 
 
IE homes would qualify for FHA 203b financing. The escrow amount is financed into the loan, and the repairs will be completed after closing. Investors have to wait 30 days before submitting an offer.
 

UI - Uninsured
Usually more than $5,000 of repairs needed

If the appraiser thinks that the home will need more than $5,000 of repairs to qualify for FHA financing, then the home is considered UI (Uninsured). Investors have to wait 5 days before submitting an offer.
 
UI homes may qualify for 203k financing - and of course cash always works well.
 
 
 

About the Repair Escrow
Know What It Is and Is Not
 
The Repair Escrow is the Appraiser's opinion of what repairs need to be completed for the house to qualify for FHA financing - but it is not a guaranteed list of all items needed to be repaired. Print out the PCS and use it as a guide - to show your buyer what repairs the appraiser thinks need to be done, but encourage your buyer to obtain a Home Inspection anyway, they will have 15 days to do so.

Winning Strategies
Bid with Timing and Knowledge

If you have an investor, look to bid on Uninsured properties on day 6 and others on day 31. Good timing may help you be the only bidder on that first open day.
 
Make sure your buyer goes over the PCS showing the repair items - they will have a hard time backing out of the contract for a reason already acknowledged by the appraiser on the PCS.
 
Be prepared with the PCS before discussing or showing a property to help your buyer understand which homes which fit their loan type.
Contact
Bart Stanley
Home Team Realty
(205) 313-6333

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