Department of Housing and Urban Developmenti (HUDi) foreclosures are available throughout the United States. They include single family homes, condominiums, and town-homes. The sales process for purchasing a HUD home isn't quite the same as you'll encounter when buying a home from an individual, so take a few notes before you go home shopping.
What is a HUD home?
The Federal Housing Administrationi (FHAi) is a part of HUD--the part that provides federal mortgagei insuranceii. If a foreclosed home was purchased with a loan insured by the FHA, the lender can file a claim for the balance due on the mortgage. FHA pays the lender's claim, then transfers ownership of the property to HUD, which sells the home.
How much do HUD homes cost?
HUD homes are appraised, then priced at fair market valuei for their location. The price of a home in need of repairs is adjusted downwards to reflect the investment the new owner must make to improve the home.
Will HUD make repairs?
HUD homes are sold as-is. The new owner is responsible for all repairs and improvementsi.
How do I find a HUD home?
You can view HUD listings by following state links on HUD's Web site. Each state's Internet destination is set up a little differently, so take some time to browse the search engines and layout.
When you've located a home you would like to see, any HUD-approved brokeri office can show you the property. The HUD and state Web sites list agents who work with HUD homes. HUD employees do not work with home buyers--you must use an agent.
HUD states that foreclosed homes are usually listed with the local MLS. That's not the case in my town, so agents often don't know about a home unless they happen to drive by and see the HUD notice in its window. Using the Internet as a search tool is critical for towns like mine.
Do I simply make an offeri to purchase a home?
HUD foreclosures are sold using a bidding process. There's an Offer Period, during which sealed bids are accepted from your agent. At the end of that period, all offers are opened. HUD will generally accept the highest bid. If the home remains unsold after that period, bids are opened as received.
If your bid is accepted, your agent will be notified within a day or two. You will be given a settlement date, usually 30-60 days from the date of your accepted contracti.
HUD will pay real estatei agencies a commissioni of up to 6% for the sale of the home. Be aware that to get paid, the selling agent must insert wording in the contract that verifies HUD will pay his or her commission.
Will HUD finance the home?
HUD does not finance homes. You'll need to arrange for conventional or other financing. Be sure your financing is in order before you make an offer. If your bid is accepted, and you do not close on the house, you will probably lose the earnest moneyi depositii you submitted with the offer.
Should I have a professional home inspectioni?
Home inspections are recommended for any home purchase. You should inspect a HUD foreclosurei before you make the offer to purchase. It will help you determine a bidding price, especially if repairs are required.
Homes build prior to 1978 may contain lead paint, so learn more lead paint hazards before making an offer. Other items to consider are asbestos content, buried storage tanks, and other environmental hazards.
Can I buy a HUD foreclosure for investment purposes?
During the initial offering, HUD homes are usually available only to those who wish to live in the home. If an owner-occupant does not bid on the home, investors are allowed to enter the bidding process.
Does HUD offer other programs?
If foreclosures are not sold within six months, HUD will sell them for $1 each to approved nonprofit organizations and government agencies. Homes must then be used create housing for families in need and to benefit neighborhoods.
HUD also offers special home purchase programs for teachers and full time law enforcement officers.
If you do your homework, HUD foreclosures can be an excellent way to enter the home buying market.
