Rural Development will now consider special purposes and flexible financing terms in the sale of Non-program real estate owned (REO) properties to local nonprofit groups and public bodies. Special purposes include:
- Sale under special provisions;
- Conversion to multi-family housing; or
- Lease for transitional housing.
What are REO Properties?
These are single family homes currently owned by the U.S. Federal Government that USDA is offering for sale as:
- USDA Single Family Housing Program Properties: These properties meet the criteria to be purchased through USDA's Section 502 Single Family Housing Direct Loan Program, which offers 100-percent financing at affordable rates and terms to help low-income individuals or households purchase homes in rural areas. Household income must be within the limit for the area, and home purchase cannot exceed the loan limit for the area. Payments are based on household income. Homes must be owner-occupied. In addition, the homes, themselves, must be modest in size, design and cost and meet the voluntary national model building code adopted by the state, along with thermal and site standards. When an eligible Section 502 borrower is not interested in purchasing a Program Property, USDA may sell it to a Non-Program buyer, such as an investor, a nonprofit, a public body, or other.
- Non-program REO Properties: When USDA takes ownership of a home that has either been enlarged or improved beyond Rural Development program standards or that requires major redesign or renovations to be brought up to Rural Development program standards as safe and decent housing, the home is no longer eligible to be financed by USDA through the Section 502 Single Family Housing Direct Loan Program. These properties are listed for sale by public auction or other method depending on the property.
Opportunities for Nonprofits and Public Bodies
- Purchase of Program and Non-program Properties: For any REO property purchase, no earnest money deposit is required. Furthermore, USDA may provide a Non-program loan to a nonprofit or public body interested in purchasing an REO property.
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Purchase of Non-program REO Properties: With recent program changes, Non-program Properties may now be sold with special preferences to local groups providing transitional housing for the homeless. Rural Development may also lease these properties for a nominal amount to nonprofits and public bodies. For Non-Program REO properties purchased for the purpose of providing transitional housing for the homeless, a 10-percent discount will be offered to nonprofit organizations and public bodies, and Rural Development will offer financing with no down payment required and a term of up to 30 years. Special terms can be considered, depending upon the planned use of the property and the repayment ability of the nonprofit. Generally, these properties will be sold "as is," although in some cases repairs to make the property decent, safe, and sanitary can be completed by Rural Development and reflected in the sales price. Local nonprofits and public bodies conducting transitional housing programs may request at any time that an REO property be withdrawn from the market for 30 days in order to allow the group to execute a purchase agreement for a Non-Program property.
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Lease of Non-program REO Properties: These properties may also be leased to nonprofits and public bodies for up to 10 years at $1 per year. To qualify to lease a Non-Program REO property, the lessee must meet eligibility requirements and show a community need. The proposed use of the leased property must meet the leasing requirement of providing transitional housing for the homeless. It must also support Rural Development’s mission of providing affordable housing to low-income rural families. Upon written notification by a nonprofit or public body of its intent to lease a Non-program property, Rural Development will withdraw the REO from sale for a period not to exceed 30 days to provide an opportunity to consider the group’s request and to execute a formal lease.
How to Locate an REO Property in Your Area
To view USDA's currently available REO properties, go to http://www.resales.usda.gov/resales/index.jsp. Select "Single Family Housing," then select your state in the drop-down menu. After the map zooms to your state, you will see another drop-down menu, which will indicate the counties in which REO properties are currently listed. Select a county to locate and view available properties.
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