Good Neighbor Next Door

HUD wants to strengthen America’s communites through the The Good Neighbor Next Door (GNND) Sales Program which allows law enforcement officers, pre-Kindergarten through 12th grade teachers, and firefighters or emergency medical technicians to contribute to community revitalization while becoming homeowners. HUD offers a substantial incentive through this program in the form of a discount of 50% of the listing price of the home in return for the commitment to reside in the property as the sole residence for 36 months.

How the Good Neighbor Next Door Sales Program works

Eligible single family homes located in revitalization areas are listed exclusively in the Good Neighbor Next Door Sales program for a period of 5 days to purchase.

How to Participate in the Program

Check the listings in your state and follow the instructions to submit your interest to purchase a specific home. If more than one person submits on a home a selection is made through random lottery. You must meet the requirements by being a law enforcement officer, teacher, firefighter, or emergency medical technician and comply with the HUD regulations for the program. HUD requires that sign a second mortgage and note for the amount of the discount. No interest or payments are required for the “silent second” as long as you fulfill the three-year occupancy requirement.

How much of a discount can I get on a HUD Home if eligible for the Program?

Qualified applicants can get a 50% discount off of the HUD appraised value. If the home is appraised at $200,000, you can purchase it for $100,000 provided you occupy the home as your sole residence for the required occupancy period. IF you qualify for any FHA-insured mortgage program, your down-payment is only $100 and you can finance the closing costs as well.

What kind of mortgage financing do I need to participate in the Program?

You can use FHA financing, VA financing, conventional mortgages, or cash. HUD requires that you sign a second mortgage and note known as the “silent second” mortgage on the discounted amount. No interest is accrued or payments due on the silent second mortgage if you reside in the home for the required 36 month occupancy period. You may have to pay a pro-rate portion of the discount to HUD if fail to reside in the home for the duration of the occupancy requirement.

What is the occupancy period?

The property must be your sole residence for a period of 36 months. This is to fulfill the goal of strengthening the community by encouraging employed and professional law enforcement officers, teachers, firefighters, or EMT’s to live in the community. You have either 30, 90, or 180 days to move into the home after hte purcahse date depending on HUD’s determination of the condition of the home and required repairs. The 30, 90, or 180th day marks the start date of the occupancy period and you are absolved of all obligations at the end of the 36th month. HUD takes the occupancy requirement seriously and will vigorously pursue violators to the fullest extent of the law.

What is the FHA Rehabilitation Mortgage and how can it help me buy a HUD Home?

The FHA 203(k) mortgage program aids homebuyers in purchasing a home and to have enough money to rehabilitate or repair it. Repairs must exceed $5000. The cost of the repairs nad the mortgage are combined into one monthly payment. If repairs do not exceed $5000, consider FHA’s 203(b) program. FHA has recently implemented a new Streamlined 203(k) program as well. Discuss your personal circumstances with your lender to figure out the financing option best for you.

Can I sell the Good Neighbor Next Door Home after 3 years and still keep the profit?

Yes, after you fulfill the residency requirement you are permitted to sell the home and keep any equity and/or appreciation.

Do I have to have a real estate agent or broker to buy a GNND home?

Yes, a HUD-approved real estate agent or broker must submit your bid.

Do I have to be a first-time homebuyer to participate in the GNND program?

No, but you must not own any other residential property at the time you submit your offer to purchase the home as well as for one year previously to that date. So if you submit your offer on January 1, 2013, you must not have owned a home after January 1, 2012.

Where are these homes located?

HUD Homes eligible for this program are located in designated Revitalization areas throughout the United States.

Does HUD provide a home warranty?

No, all homes through the GNND program are sold “as is”.

Can I purchase Multiple Unit Properties (duplexes, triplexes, etc) through GNND?

No, only single unit homes, townhouses, and condominiums qualify for GNND.

Do I have to pay Earnest Money or other deposits to submit a contract for a GNND home?

Yes, the amount of earnest money deposit is equal to one percent of hte list price, but no less than $500 and no more than $2000. HUD considers are offers a committment to purchase the home if you are awarded the sale so be sure to carefully consider your offer before it is submitted and be aware of HUD’s policies regarding earnest money.

HUD’s policy on earnest money states: “If an offer is accepted, the earnest money deposit will be credited to the purchaser at closing. If the offer is rejected, the earnest money deposit will be returned. Earnest money deposits are subject to total forfeiture for failure of the participant to close a sale.”

Can I bargain with HUD on the purchase price of a GNND Property?

No, you must offer the exact HUD listing price when bidding on any GNND property and then you will receive a 50% discount off of the list price.

What if I leave the employment that made me eligible, for any reason, during the mandatory 3-year residency period?

Nothing happens but you must continue to live in the home for the duration of the occupancy period. If you move out, you will have to repay HUD on a prorated schedule. In addition, prior to purchase, you must certify that is your good faith intention to remain employed as a law enforcement officer, teacher, firefighter, or EMT for one year beginning with your purchase. Do not attempt to participate in the GNND program if you do not plan on remaining employed as required for one year.

Some agencies have other homebuying programs. Can GNND work in conjunction with these programs?

Yes, as long as you meet all of GNND requirements while participating with the other programs.

What happens if I fail to honor the 3-year occupancy period?

HUD can demand repayment of the discounted amount on a prorated basis. THis means you will have to pay 1/36th of the discount you received for each month you fall short of the occupancy period. HUD may also initiate administrative sanctions including, but not limited to, barring the participant from any other HUD/FHA programs, as well as other federal programs. In the case of fraud or abuse of the program, HUD will refer the case to HUD’s office of the Inspector General for investigation and possibly criminal prosecution. Criminal prosecution for fraud and abuse in the GNND program may result in a fine up to $250,000 and/or two years incarceration in a federal prison. HUD may also notify the participants employer.

How does HUD enforce the 3-year residency obligation?

The participant must certify they are living in the GNND home as the sole residence at the time of purchase and each year after that for the duration of the occupancy obligation. HUD may conduct spot-checks to be sure that the GNND home is indeed the sole residence at any time during the 3-year period. The participant must also sign a note and mortgage for the discount amount and HUD may also foreclose on the property if you fail to comply with the residency obligation.

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