Building a Home
The Minimum Property Standards (MPS) establish certain minimum standards for buildings constructed under HUD housing programs. This includes new single-family homes, multi-family housing and healthcare-type facilities.
HUD requires that each property insured with an FHA mortgage meet one of the nationally recognized building codes or a state or local building code based on a nationally recognized building code. In areas where such state or local codes are used, HUD determines if the state or local code is comparable to the model building code. There are also areas of the United States that do not have building codes. If no state or local building code has been adopted, the appropriate HUD Field Office will specify a building code that is comparable to one of the nationally recognized model building codes.Interstate Land Sales
The Interstate Land Sales program protects consumers from fraud and abuse in the sale or lease of land. In 1968, Congress enacted the Interstate Land Sales Full Disclosure Act, which is patterned after the Securities Law of 1933, and requires land developers to register subdivisions of 100 or more non-exempt lots with HUD, and to provide each purchaser with a disclosure document called a property report. The property report contains relevant information about the subdivision and must be delivered to each purchaser before the signing of the contract or agreement.
Buying Lots from Developers
Be well informed when shopping for land. Lots may be marketed as sites for future retirement homes, for second home locations, or for recreational or campsite use. However, be wary of any investment aspect that may be stressed by sales personnel. If you plan to purchase a lot which is offered by promotional land sales, take plenty of time before coming to a decision. Before signing a purchase agreement, a contract, or a check:
- know your rights as a buyer;
- know something about the developer;
- know the facts about the development and the lot you plan to buy; and
- know what you are doing when you encounter high-pressure sales campaigns.
- a copy of the corporate charter and financial statement;
- information about the land, including title policy or attorney's title opinion, and copies of the deed and mortgages;
- information on local ordinances, health regulations, etc.;
- information about facilities available in the area, such as schools, hospitals and transportation systems;
- information about availability of utilities and water, and plans for sewage disposal;
- development plans for the property, including information on roads, streets and recreational facilities; and
- supporting documents, such as maps, plans and letters from suppliers of water and sewer facilities.
The company filing this information must swear and affirm that it is correct and complete, and an appropriate fee must accompany submission. The information is retained by HUD and is available for public inspection. The property report, which is also prepared by the developer, goes to the buyer. The law requires the seller to give the report to a prospective lot purchaser prior to the time a purchase agreement is signed. Ask for it. The seller is also required to have the buyer sign a receipt acknowledging receipt of the property report. Do not sign the receipt unless you have actually received the property report. Check the developer’s property report before buying. This is the kind of information you will find in a property report:
- distances to nearby communities over paved and unpaved roads;
- existence of mortgages or liens on the property;
- whether contract payments are placed in escrow;
- availability and location of recreational facilities;
- availability of sewer and water service or septic tanks and wells;
- present and proposed utility services and charges;
- the number of homes currently occupied;
- soil and foundation conditions which could cause problems in construction or in using septic tanks; and
- the type of title the buyer may receive and when it should be received.
Read the Property Report Before Signing Anything
This report is prepared and issued by the developer of this subdivision. It is not prepared or issued by the federal government. Federal law requires that you receive this report prior to signing a contract or agreement to buy or lease a lot in this subdivision. However, no federal agency has judged the merits or value of the property. If you received the report prior to signing a contract or agreement, you may cancel your contract or agreement by giving notice to the seller any time before midnight of the seventh day following the signing of the contract or agreement. If you did not receive this report before you signed a contract or agreement, you may cancel the contract or agreement any time within two years from the date of signing.Your Contract Rights
If the lot you are buying is subject to the jurisdiction of the Interstate Land Sales Full Disclosure Act, the contract or purchase agreement must inform you of certain rights given to buyers by that Act. The contract should state that the buyer has a "cooling-off" period of seven days (or longer, if provided by state law) following the day that the contract is signed to cancel the contract, for any reason, by notice to the seller, and get his or her money back. Furthermore, unless the contract states that the seller will give the buyer a warranty deed, within 180 days after the contract is signed, the buyer has a right to cancel the contract for up to two years from the day that the contract is signed, unless the contract contains the following provisions:
- a clear description of the lot so that the buyer may record the contract with the proper county authority;
- the right of the buyer to a notice of any default (by the buyer), and at least 20 days after receipt of that notice to cure or remedy the default;
- a limitation on the amount of money the seller may keep as liquidated damages, of 15% of the principal paid by the buyer (exclusive of interest) or the seller's actual damages, whichever is greater.
Contract Rights Concerning Property Reports
Even if you received the property report prior to the time of your signing of the contract or agreement, you have the right to revoke the contract or agreement by notice to the seller until midnight of the seventh day following the signing of the contract. You should contact the developer, preferably in writing, if you wish to revoke your contract and receive a refund of any money paid to date. Even if the property report is delivered to you before you sign a sales agreement, the law gives you a "cooling-off " period. This right cannot be waived.
- tracts of fewer than 100 lots which are not otherwise exempt;
- lots in a subdivision where every lot is 20 acres or more in size;
- lots upon which a residential, commercial or industrial building has been erected, or where a sales contract obligates the seller to build one within two years;
- certain lots which are sold only to residents of the state or metropolitan area in which the subdivision is located;
- certain low-volume sales operations (no more than 12 lots a year);
- certain lots that meet certain local codes and standards and are zoned for single-family residences or are limited to single-family residences by enforceable codes and restrictions; and
- certain lots, contained in multiple sites of fewer than 100 lots each, offered pursuant to a common promotional plan.
Other exemptions are available which are not listed above. If you have reason to believe that your sale is not exempt and may still be covered by the law, contact the Interstate Land Sales Division.
Knowing your rights under the law is the first step in making a sensible land purchase. To exercise those rights, you also must know something about the honesty and reliability of the developer who offers the subdivision that interests you. Don’t fail to ask questions. Whether you are contacted by a sales agent on the phone or by mail, at a promotional luncheon or dinner, in a sales booth at a shopping center, or in the course of your own inspection of the subdivision, make it your business to find out all you can about the company and the property. In addition, get any verbal promises or representations in writing. Don’t fail to ask questions. If you are seriously interested in buying a lot, ask if the company is registered with HUD or is entitled to an exemption. Request a copy of the property report and take the time to study it carefully and thoroughly. If you still have unanswered questions, delay any commitment until you have investigated. Discuss current prices in the area with local independent brokers. Talk to other people who have purchased lots. A local Chamber of Commerce, Better Business Bureau, or consumer protection group may have information about the seller's reputation. Inquire through county or municipal authorities about local ordinances or regulations affecting properties similar to that which you plan to buy. Don't be high-pressured by sales agents.
Once you have decided on an appealing subdivision, inspect the property. Don't buy "sight unseen." Better yet, hire an InterNACHI inspector to perform a thorough property inspection. Also, check the developer's plans for the project and know what you are getting with your lot purchase. It's a good idea to make a list of the facts you will need to know. Some of the questions you should be asking, and answering, are these:
- How large will the development become?
- What zoning controls are specified?
- What amenities are promised?
- What provision has the developer made to assure construction and maintenance?
- What are the provisions for sewer and water service?
- Are all of the promised facilities and utilities in the contract?
- Will there be access roads or streets to your property, and how will they be surfaced? Who maintains them? How much will they cost?
- Will you have clear title to the property? What liens, reservations or encumbrances exist?
- Will you receive a deed upon purchase or a recordable sales contract?
- What happens to your payments? Are they placed in a special escrow account to pay for the property, or are they spent at once by the developer?
- If the developer defaults on the mortgage or goes bankrupt, could you lose your lot and investment to date to satisfy a claim against the development?
- What happens when the developer moves out? Is there a homeowners' association to take over community management?
- Are there restrictions against using the lot for a campsite until you are ready to build?
- Are there any annual maintenance fees or special assessments required of property owners?
This is a partial list of points to consider before you commit your money or your signature.
Here are some of the practices avoided by reliable sales operations. Watch out for them and exercise sales resistance if you suspect they are occurring: