So, you are looking into Hud Homes because you hear you can get them for a good price…. Lets look at what it takes to buy one and the process you need to follow.
First What is a Hud Home?
Hud The Department of Housing and Urban Development often gets homes that are up for foreclosure action on an FHA-insured mortgage and offers them for resale. The homes are 1 to 4 unit residences that are offered for sale to recover the loan cost.
Here are 2 actual homes in Florida listed to be sold in March of 2008.
The Single Story Home costs $70,000 and the Two Story home costs $285,000 asking Bid.
Who can buy a Hud Home?
Basically anyone with the cash or who can get a loan can purchase a Hud Home. The first offer will go to the occupant of the home and then once that offer is rejected anyone can purchase the home even investors. Some discounts are available for people relocated because of Huricane and other Disasters so you should check with HUD if you are one of those that were effected.
How are the homes listed?
The homes are listed online at www.hud.gov but your local realtor will probably also know about any new homes in your area.
How are the homes sold?
Well because HUD needs to recover as much of the loan as they can they put the homes up for bid. Even if you are the first person to give the minimum bid that the home was listed at there will be a waiting period for other bids. All bids must go through a Licenced Realtor so you can expect to pay a percentage to them unless the home you selected specifically says that the broker fee is included.
Good Neighbor Discounts
There are also discounts depending on where the home is located. Good Neighbor Next Door initiative designed to encourage renewal of revitalization areas by providing law enforcement officers, firefighters, emergency medical technicians and teachers an opportunity to purchase homes in these communities. HUD provides a substantial incentive in the form of a fifty percent discount off the list price of eligible properties. Additionally to qualify you must take out a Second Mortguage for the price of the discount so if a home is listed for $100k and they take off $50K then you need to get a Second for $50,000 that will be dropped once you have lived in the home for 3 years. The idea is to get good people into bad neighborhoods and help the people from the area that are giving back to their community.
Do you need to get a home inspection?
Yes! Unlike any other home or item you purchase buying a home or item from the federal government is always AS IS where IS means you are going to get screwed if you don’t know every detail about the property you are buying. Hud will even suggest that you get an inspection and when they suggest it you better do it…. Another thing you will want to do is run a check on back taxes and leans by other credit sources. You will also want to make sure beyond a reasonable doubt that the home is safe from all toxic materials. This includes any Lead Paint and buried Oil Heat Storage Tanks…
Basically once you buy a home or property from the Federal Government you own the home and any problems that come with it.
Although HUD only sells homes there have been reports of Federal Sales of Commercial Property that have left the new owner with toxic waste dumps and once the new owner takes posession they are slapped with a Federal Suit to perform all the cleanup that they never created.
So be careful.
It is a little bit like buying a car from a police auction only to find out they left a Kilo of Cocaine in the seat cushions and then while you are driving it off the lot a police dog sniffs it and you go to jail for 60 years. BE CAREFUL and get an inspection and check any source of problems and hold your Realtor (hopefully a Real Estate Lawyer and not just a sales person) to the letter of the contract to protect your best interests.
Is Hud the only source of Federal Homes and Property for sale?
No. Almost every Department of the Federal Government has some type of property they are trying to get rid of. Many of them group sales together and often use Auctions as a resource. Other Departments have internal resources to handle sales and will hold auctions or list homes for direct sales.
So, overall is a HUD Home something that you should get involved in?
Yes for the most part buying a Hud Home is a good opportunity. If you are someone that lives in the area of the home and know the ins and outs of the neighborhood then you will better understand what the property is worth. If you are a distant investor you will need to work up all the comparable home sales for the area and you will need to quickly understand the location.
Not every Hud Home is located in a City some are located in Suburban and even Rural areas. You should buy the home based on whether it fits your needs and not just because of the price. If you are someone that needs public transportation or regular medical visits then a rural community would not be for you. If you are someone that likes the quiet of no close neighbors then a home located away from the city may be what you want.
If you find a property that is right for you or that you think will make a good investment then place a bid and maybe you will get your next home.