$1 houses for sale across the nation -- courtesy of the
federal government's new "Good Neighbor Policy"
By John Latta • Bankrate.com

Suddenly, one dollar is all it takes to buy a house.

Thanks to a new federal program, thousands of $1 homes are about to go up for sale in towns big and small in every corner of the country.

In what it calls "The Good Neighbor Policy," the Federal Housing Administration will sell some of the homes it has foreclosed on to local governments for just one dollar.

Those local authorities will then decide what to do with the houses.

But Washington insists the dollar domiciles be used for the betterment of the community, and local government buyers will have to outline their post-sale plans before they buy.

The FHA expects the houses will be resold or rented out to needy families, or made specials for first-time home buyers. Or they could even be torn down to make way for something community-enhancing such as a child-care center or vital new enterprises, like job training.

After the FHA forecloses on a home it will try to sell it for market value for six months, and only then slide it into the $1 bargain-basement bin.

If the houses are in such poor shape that they have to be torn down, the FHA will do the demolition, then sell the vacant lot for a buck instead.

Up to your local government
"The local authorities won't be able to do just anything they like with these houses," said an FHA representative, "they'll have to be used to benefit their surrounding community or help people in need.

"The local authority can sell a house at a huge profit if they can make it, but that profit will have to be plowed back into community redevelopment projects under our terms. Mostly, we expect local authorities to sell to people who might otherwise not get a home or find other ways to use the homes to bring life and business back to dying areas."

The missing piece of the puzzle is just how local government or housing authorities will make those decisions. People who want to buy $1 homes will have to find out from their local government how they can get in line and how potential homeowners or home uses will be selected.

When a local authority applies to buy a $1 house it will have to give the FHA a broad outline of its plan for the house, describing in general terms how it will use the property to help community rebuilding. Once approved, the sale goes ahead and the FHA keeps an eye out to see the plan is followed.

All across the U.S.A.
The program will kick in on May 1, but already 3,000 houses are in line to be dumped for a dollar by the FHA, a part of the Department of Housing and Urban Development.

The houses are available in all 50 states. HUD has listed the cities, but will wait until the May 1 launch to reveal the addresses, because some houses will be added and some will come off the present list before that date.

By the way, the whole program will cost taxpayers nothing. That's because the FHA makes more than it spends, returning about $1.5 billion to the U.S. Treasury last year.

"The Good Neighbor Policy will build better futures for hundreds of communities and thousands of families across our nation," said HUD Secretary Andrew Cuomo. "It will help reverse decades of decline in our cities by revitalizing neighborhoods, attracting new residents and promoting homeownership."

It's certainly a hit with local officials. Thomas Cochran, executive director of the U.S. Conference of Mayors, called the initiative "a great opportunity for cities and counties."

Columbus gets there first
The $1 house idea is the brainchild of Rep. John Kasich (R -Ohio), chairman of the budget committee. And so the first sale under the dollar deal will be a three-bedroom house at 344 Midland Avenue in Columbus, Ohio -- part of the congressman's district.

Kasich called the program "a great way to put power in the hands of local people."

"The longer they stay vacant, the greater the chances they'll deteriorate and be more difficult to put to good use," says the congressman. "Placing them in the hands of local officials will help cut red tape and insure that they'll more quickly be used in a way that meets local needs."

The 3,000 homes waiting for dollar buyers are only a handful of the houses the FHA has foreclosed on and put on the open market. In the past six months the FHA sold about 39,000 homes this way -- leaving only those lonely 3,000 eligible for the $1 deal.

The FHA insures about 6.7 million mortgages. When homeowners can't pay, the FHA tries to work out payment plans so the owners can stay in the home. If that fails, the lender forecloses and the house goes to the FHA in return for the payment of the outstanding mortgage balance. Then it goes up for sale.

And now, if it stays unsold for six months it becomes a 100-cent bargain.

The new policy will complement HUD's Direct Sale Program, which sells houses it has foreclosed on to local government and community-based nonprofit organizations for a 30 percent discount as soon as it takes over the house.