What is a HUD Home?
A HUD home is a property that is currently owned by the federal department of Housing and Urban Development. HUD acquires properties through foreclosure on FHA (Federal Housing Administration) backed mortgages.
How Can I Buy a HUD Home?
The only way to bid on a HUD home is through a licensed real estate agent who is registered to bid with HUD. Your real estate agent will walk you through the process and counsel you on the benefits and risks of the purchase. Tim and Dee Ann are licensed real estate agent registered to bid on HUD homes and would love to help you with your purchase!
Why Buy a HUD Home?
Usually the answer is price. These foreclosed properties are owned by the government, who wants to sell them. So they are usually priced below other properties of a similar size and location.
Why is the Price Lower?
In many cases, the property has undergone abuse and neglect and may need more repairs than other properties. The low price usually brings in a lot of buyers to view to bid on the property so that HUD may take the Highest and Best offer, which is sometimes more than the list price of the home!
Are There Risks?
Yes, there are definitely risks. If you’re the winning bidder, you do get an inspection period on a HUD purchase. However, unlike buying from a regular seller, if you find problems with the property, no one will fix them for you. Therefore, Lauren highly advises that when bidding on a HUD property you prepare for upcoming repairs by having money in reserves and by prequalifying for a mortgage with repair escrow. Sometimes upon inspection you will find problems that will make the property un finance able or financially inadvisable, so sometimes after inspection, you may have to walk away. There is no penalty for cancelling the transaction upon an unsatisfactory inspection, but there is the time spent on the property and the money spent on the inspector.
Are There Benefits?
Other than price, one benefit of buying a HUD home is that HUD prepares a Property Condition Report and Property Condition Summary for every home they sell! This is a great benefit to you that banks and other foreclosing entities do not offer to buyers. HUD representatives check most of the main systems in the house, including the furnace, roof, water heater, electric, plumbing, and sewer and tell you if there is a known problem before you even place a bid. Make sure your agent gives you a copy of the PCR and PCS before you bid. This helps you understand whether the home will require a repair loan. However it’s not a guarantee against additional problems.
Another benefit of buying a HUD home is pride of ownership and home improvement. If you’ve always dreamed of working on a fixer-upper, this could be your chance!
Can I Buy A HUD Home for an Investment Purchase?
That depends. Most often when HUD puts a property on market, the property is listed in an Owner Occupant period. During the Owner Occupant period, HUD only accepts bids from people who will move into the house and live in it as their home. If you’re looking for an investment property, you’ll have to wait until the Owner Occupant period has passed before you may bid on a HUD property.
And you can search the HUD properties currently listed for sale anytime here: https://www.hudhomestore.com