Half-price homes for ‘Good Neighbors’

Eligible teachers, firefighters get first dibs on foreclosures

Mary Umberger
Inman News

Who wouldn’t want to be able to buy a home at half price?

That’s the promise of a little-known federal program that aims to provide affordable housing for teachers and certain other professionals.

The Good Neighbor Next Door program is administered by the Federal Housing Administration, which wants to sell homes that it insured and have been foreclosed upon and now are owned by the federal Department of Housing and Development.

Buyers in the program pay half the house’s appraised value and commit to live there three years, but there are numerous restrictions on who can buy them and the homes aren’t in every neighborhood where HUD owns homes.

Five things to know about the Good Neighbor Next Door program:

1. It’s not available to everyone: Only teachers, firefighters, police officers and emergency medical technicians can participate. The idea, according to the FHA, is to give these community servants a chance to live within the communities where they work.

Qualifying professionals don’t have to be first-time buyers, but they may not have owned a home for one year prior to applying to buy one of the Good Neighbor Homes.

2. The HUD-owned homes available through the program are in what the federal agency describes as "revitalization areas," which have a combination of low household incomes, low homeownership rate and a significant number of HUD-owned properties.

Further, the professionals who buy the house must be working in the precinct or other defined area where the house is located. Teachers can buy designated houses that fall within the neighborhood boundaries of the schools where they work.

3. Here’s how it works: The qualifying buyer, having made a downpayment of 1 percent of the purchase price, pays half the appraised price, either with a mortgage or by paying cash. (Applicants need to put down 1 percent of the purchase price as earnest money, which will be credited to them at the closing.)

Then, the buyer also gets what’s known as a "silent second" mortgage for the other half of the sales price. This is a loan that has no principal or interest payments, and if the buyer remains in the house and keeps up his payments for three years, that second mortgage is forgiven.

If the buyer moves out of the house within three years, the program can charge him or her for a prorated portion of the silent-second mortgage.

4. Qualifying professionals need to strike quickly if they want to participate: Homes that are part of the program are listed for sale every week, and HUD accepts offers for five days; if no one bids for them in the Good Neighbor phase, they go into the general HUD marketplace at full asking price. In case of multiple bids on a property, HUD picks the qualifying buyer in a lottery arrangement.

The homes must be purchased through real estate agents.

And there are by no means a huge number of homes available in the program: Although there are hundreds of designated revitalization areas across the U.S., a recent check of weekly postings of qualifying properties turned up just 13 homes nationwide.

5. For more information, visit HUD’s website.

Mary Umberger is a freelance writer in Chicago.

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