The Teacher Next Door Program (TND)also known as the Good Neighbor Next Door Program (GNND) is a HUD homes special program open to not only teachers, but also police officers, firefighters and emergency medical technicians (EMT). To get started and for qualifying purposes there are three things you need to know about HUD houses and the HUD Good Neighbor Next Door Program (GNND) 50% off discount:
Each participant is defined as follows:
A teacher is defined as an individual who is employed full time by a public or private school or educational agency. Holds a current State-level certification, as a classroom teacher or educational administrator (Principal, Assistant Principal, etc) in grades K through 12. And in good standing with the employer.
Substitute teachers who are employed full-time (every day) on an on-going, full-time, contract (standard teaching contracts are generally for 180 school days a year, or more) with a school system. These are employees who simply work in a different school every day or for short periods in the same school.
Teachers have to buy property in the same school system where they teach – or in the case of a private school, within the radius where the school draws the students.
A Law Enforcement Officer, for purposes of this program, is defined as an individual who is employed full-time by a Federal, State, county, or municipal government and is sworn to uphold, and make arrests for violations of, Federal, State, County, or municipal law and is in good standing with the department.
Firefighters and EMTs must be employed full-time as a firefighter or emergency medical technician by a fire department or emergency medical services responder unit of the federal government, a state, unit of general local government, or an Indian tribal government serving the area where the home is located.
All participants will have to agree execute a second mortgage and note that will be for the amount of 50% of the purchase price. In other words, if a home is purchased with a list price of $100,000, there will be a second mortgage on the house that has NO monthly payment but will be recorded as a lien against the property for three years.
The occupancy restriction for program participants who purchase HUD homes is that they must occupy the property as their primary residence for three years beginning on the date of the closing documents. During the entire three year term, participants may not own any other residential real property.
If someone currently owns real property, it must be sold before closing on a GNND property.
Participants may be required to recertify each year to verify occupancy and compliance.
Once the three year residency period has passed, the second mortgage (lien against the property) is released.
If for some reason you must move or sell the home before the end of the required three year period, you must repay 90% of the second mortgage during the first year, 60% during the second year, 30% during the third year and at the end of the three year period the mortgage is forgiven.
The second mortgage is not calculated in the monthly payment. The second mortgage is a silent second and requires no repayment with full program compliance.
The first mortgage on the property which will have a monthly payment will typically include more than just the other 50% of the list price. Closing costs, commissions & renovations can be financed in with the purchase amount.
For example, a property with a $100,000 list price has a $50,000 silent second mortgage and a $50,000 first mortgage with monthly payments due. If the purchaser does not have closing costs needed in cash, this amount may be added to the first mortgage. HUD does not pay any of a GNND participants closing costs since the home is being sold at a 50% discount. All closing costs will be calculated based on the list price, not the discounted mortgage amount. HUD homes allows sales commission of up to five percent so a five percent commission paid on the purchase of a HUD home in this example would be 5% of $100,000 or $5,000. Closing costs such as lender fees, transfer charges, and settlement expenses might equal $8,000. The property may need $20,000 in renovations since it’s being sold as-is. HUD houses are always sold as-is.
The first mortgage on the referenced property would be a total of $83,000 ($50,000 discounted price plus $5,000 commission plus $20,000 rehab). And the monthly payment would be calculated with the approximate loan amount of $83,000. That would make the realized discount on the property listed at $100,000 an 83% discount, but it’s important to note that the discount is taken from the as-is value of the home. After improvements have been completed, the home’s value would increase as well. The increase in value may be more or less than the actual cost of the renovations, but definitely more than the as-is value. The discount would have to be calculated based on the after-repair value.
The TND/GNND Program has additional specific requirements that must be met by program participants in order to purchase HUD homes at a 50% discount.
For more information and FREE sample pages of How To Make Money With HUD Homes and The Teacher Next Door Program by Nishika Jones, visit HUD Homes Sample Pages.
Nishika N. Jones, Urban Living Realty Broker, was licensed in 2000 as a real estate salesperson and worked for a Broad Listing Broker, where she became well-versed in HUD Home sales.
Nishika was designated Salesperson of the Year in 2002 at Tenant Buyer Homes, the Broad Listing Broker responsible for oversight of HUD home sales in Baltimore. With this successful foundation in the sale of HUD homes, Nishika branched out as an independent broker in 2003. That same year, Realtor Magazine featured Nishika’s career. She then went on to be awarded the 2003 Rookie Realtor of the Year Award by the Greater Baltimore Board of Realtors and, in 2005, was selected as the primary contact for the sale of an estimated 300 Baltimore City-owned properties on behalf of the Baltimore Economy and Efficiency Foundation and the Greater Baltimore Board of Realtors.
Nishika is the author of How To Make Money With HUD Homes & The Teacher Next Door Program, a step by step HUD profits program.