If you’re a first responder who isn’t familiar with the Good Neighbor Next Door (GNND) program, there’s a chance you could be approved to purchase a Department of Housing and Urban Development (HUD) home at a 50% discount. GNND is open to qualified police, firefighters, emergency medical technicians, and teachers. So what kind of houses are we talking about here? The majority are of the FHA REO variety, which is an industry acronym for foreclosures. They are located in designated revitalization areas. Recipients of the discount program must live in the house for at least three years to qualify.
Though the GNND program has been around for a while, recent changes in how it is administered, changing from a lottery system for awards to what is called competition and highest net proceeds, should give cause for any first responder (even if you haven’t been lucky in the past) to re-apply. The old way of selection involved a buyer placing a full priced bid on a property, and then if they were selected by a random drawing of names, would receive the half price discount. The entire transaction was usually accomplished without the aid of a real estate agent.
The new method directs interested first responders to make use of a participating agent who makes offers on their behalf (which can now be either lower or higher than the listed price) during the five day bidding period. The new competitive system awards the property to the bid which would provide the most net income to HUD. For example, a property is listed at $90,000. The five day period yields three bids at the listed price and a single bid at $100,000. The high bid will be accepted, let’s say it was entered by Policeman Bob, and he gets the property at a 50% discount off his bid, which means he pays only $50,000 for the house.
It should be noted that most GNND buyers can get FHA financing with only a $100 down payment. First responder purchasers are required to sign a “silent” no interest, no payment mortgage note for the discounted portion of the sale, but don’t worry, this note is forgiven after the three year commitment has been honored.
The Heroic Investing Team
Flickr / bowler1996