What Is Conveyance Condition?

This is from Exhibit A, Section 2 “Acceptable Conveyance Condition,” from HUD’s Mortgagee Letter 2010-18.

Conveyance Condition is the condition that a foreclosed FHA insured property needs to be in before the bank can give it to HUD.  There are a many things that need to happen for a property to be in CC that are beyond the scope of P&P, like a clear title.  The following is what we are concerned with.

At the time of conveyance to HUD, a property must be undamaged by fire, flood, earthquake, hurricane, tornado, or mortgagee neglect, as set forth in and required by 24 CFR §203.378. For condominiums that were secured by mortgages insured under §234 of the National Housing Act, the property must also be undamaged by boiler explosion, as required by 24 CFR § 234.270. In addition, the property must be secured, the lawn maintained, winterized (as applicable), and interior and exterior debris must be removed with the propertys interior maintained in broom-swept condition. This includes the removal of any vehicles and removal of any personal property in accordance with local and state requirements. Mortgagees are responsible for the damage to, or destruction of, properties due to their failure to take reasonable action to secure, inspect, preserve and protect such properties.If a property is damaged due to mold resulting from the mortgagee’s failure to protect and preserve, the mortgagee must remediate the cause of the mold and complete any other required P&P actions to minimize further mold and/or water damage prior to conveyance of the property.

  • Securing includes all doors, windows, other openings, fence gates when pool/spa is present, and the pool.
  • Maintaining the lawn means the lawn has to be cut within the last 2 weeks and shrubs trimmed once in a growing season.
  • Winterization should take place during the winter season which is October 1st through March 31st.

So essentially you are on the hook to provide bids for all damages, debris, and personal property.  Just don’t miss a roof, mold, or anything else that would be expensive for you to repair at your own cost.  Don’t think they won’t make you reroof a house that you didn’t tell them had a leak.  It’s happened to me before.  If you have employees make sure they know how important it is to take pictures of the roof everytime they are at the property and of all the ceilings when they are inside the property.  So if any of your clients ask if a property is in conveyance, try to always find something so you can say no.  Don’t be the one on the hook for it.

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