Keeping you informed!

This is a significant update!

If you overbid on a HUD and use an FHA loan, you will have to pay the difference out of pocket!

The below information came from HUD's site at http://www.hudpemco.com/FAQ.htm#41

What if my offer price is higher than the appraised value?
FHA guidelines will limit the underwriter to insuring the loan for the lower of two values; the offer price or the appraised value (displayed as the As-Is Value). If your offer price is higher than the appraised value, the FHA underwriter will require that your buyer(s) cover the overbid amount with a cash deposit. The buyer(s) will not be allowed to build the overbid amount into an FHA loan.

HUD’s mortgagee letter 2000-27 will require that the FHA UW use the appraisal obtained by PEMCO. This mortgagee letter instructs the FHA UW NOT to obtain a new appraisal; nor can the FHA UW request that new comps be pulled and the PEMCO appraisal updated.

If your offer price is higher than the appraised value and tentative acceptance is extended to you, the options available to you are:

1.       Proceed with contract execution. PEMCO will require that the selling broker verify that the cash reserves are available to cover the overbid amount before we execute the contract.

2.       Use cash or conventional financing. All of the guidelines outlined above apply to FHA financing only. A conventional lender will have their own set of guidelines not governed by HUD.

3.       Cancel prior to contract execution. If there is an acceptable backup, we will award tentative acceptance to the backup offer. If there are no acceptable backup offers, the property will be relisted.