What Does "subject to HUD Guidelines 24 CFR 206.125" Mean When Buying a Non-HUD Home?

U.S. Housing and Urban Development guidelines 24 CFR 206.125 apply to home financing, specifying certain restrictions the seller must adhere to during the course of the sale. Homes sold with this disclosure are foreclosed homes sold by banks.

When a home is subject to HUD guidelines 24 CFR 206.125, any offer accepted on the home is likely to have restrictions that affect the deal negotiations. This language pertains to homes on which bank have foreclosed. In addition, the guidelines specify that the home was financed using a reverse mortgage and that the owners defaulted on the mortgage due to failing to pay taxes or due to the death of the owner.

A reverse mortgage is a loan that is available to seniors. In a reverse mortgage, the equity in the home is released to the owner in either one payment or multiple payments. The obligation to repay the loan is deferred until the owner sells the home or passes away. HUD regulates how all homes with a reverse mortgage are sold, attaching its guidelines to each listing. By disclosing those terms, the buyer understands the seller's restrictions. One such restriction is that repairs cannot be made to the home without the approval of the Secretary of HUD.