What You Need To Know About HUD Foreclosure Listings

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When a homebuyer takes out a loan to buy a house, but at some point becomes unable to pay his or her mortgage, the home goes into foreclosure and may be reclaimed by the bank. If the mortgage is insured by the Federal Housing Administration (FHA), however, the lender is able to file a claim for the balance due. The FHA is a part of the US Department of Housing and Urban Development (HUD). The FHA repays the lender the balance, and then ownership of the home is transferred to HUD. HUD puts these homes up for sale in order to recover the losses incurred by the foreclosure. Through HUD, buyers can purchase residential properties capable of accommodating between one and four family units. However, the process of buying these HUD properties differs somewhat from the normal process of purchasing a home.

Valuing a HUD Home

Before putting properties on the market, HUD will appraise and establish its fair market value. This price is based on the house itself as well as the home’s location and its state of repair. If it is in an undesirable neighborhood or in need of crucial repairs, or both, it will be offered for a lower price. Likewise, a well-maintained home in a nicer neighborhood will be sold at a higher price. Before even bidding on a HUD home, you should order your own home inspection conducted by a qualified inspector. HUD homes are sold as they are, with no guarantees; once the purchase is complete, the new owner is responsible for all necessary repairs. Because HUD homes are foreclosed, not for sale by owner, they have not been prepared for sale and often require some repair. This can be minor, such as painting and cleaning, or much significant, like plumbing or roofing work, which are much more time, money and effort intensive. An inspector’s estimation of the home’s value and the costs of necessary repairs will help you to determine a realistic offer for the home. They will also be able to alert you to other considerations that can affect bid price, such as the presence of lead-based paint, asbestos and other hazards.

Purchasing a HUD Home

HUD maintains a database on its website, which is publically accessible. Depending on the state in which you’re interested in buying, you may also be able to view a list of HUD-approved real estate brokers. Otherwise, you may call the offices of your preferred local broker and ask if they are able to show HUD homes; if not, if they may be able to connect you with an agency that is. Anyone who has enough cash in hand or is able to secure as sufficient loan can attempt to purchase a HUD property. HUD does not finance homes; buyers who require financing will need to apply for a mortgage from a lender. This financing must be approved before you are even able to make an offer on a HUD home. HUD foreclosures are sold via bidding, and you will need a real estate agent to assist you with the bidding and closing process. Your agent will submit a sealed bid to the agency during the initial offering period; all offers are unsealed and reviewed at the end of the period, with the contract typically going to whichever bid provides the highest net gain to HUD. After the initial offer period, if no bids are accepted and the home goes unsold, HUD considers bids as they are submitted. HUD will notify your real estate agent if your bid is accepted. A settlement date will be set, typically between 30 and 60 days following the acceptance. HUD homes are not initially available to be purchased as investment properties. During the initial offering period, only bids from buyers who intend to be owner-occupants are considered. If, after that time, the home remains unsold, investors are allowed to submit bids on the property.

Special Programs

If a home valued at $25,000 or less goes unsold for six months, it may become eligible for the One Dollar Home Program. This allows municipalities to purchase homes for $1 and use them to provide housing for low-income families. Since HUD would prefer to see a larger return on such properties, the longer one of these homes remains for sale, the greater the likelihood a buyer will be able to get a good deal on it. HUD also runs a Non-profit Program for approved faith-based and nonprofit organizations. These groups can receive a 30 percent discount on homes so they can resell them to low income and first-time buyers. Under the Good Neighbor Next Door Program, teachers, law enforcement personnel, emergency medical technicians and firefighters can enjoy a discount up to 50 percent on a HUD home, provided that they will live there for the next three years. Although there are certain quirks and restrictions to purchasing a HUD foreclosure, the process is relatively simple and straightforward. If you’re interested in viewing or bidding on one of these properties, you should contact your approved and trusted real estate broker for more information.