An explanation of HUD housing, onsiderations before purchasing a HUD home, and possible HUD dwellings and financing options for such properties.
HUD is an abbreviation for the United States Department of Housing and Urban Development. The agency has been in business since 1934. HUD homes are homes which have been foreclosed on and deeded to HUD. The Federal Housing Administration (FHA) is normally the lending agency that had provided the mortgage on the property which was foreclosed on. HUD then assumes the responsibility of attempting to recoup the financial loss taken by the Federal Home Admistration as a result of the unpaid balance on the mortgage. HUD attempts to do so by selling the home in as timely fashion as possible at the fair market value. Fair market value is determined by comparison of the HUD home with similar homes within the area which have been sold within six months of the HUD listing. The prices the properties sold for then become a guideline for establishing the fair market value of the HUD home. Most real estate agents should be able to let interested parties know of any HUD properties available in their area.
HUD homes can be town homes, single family dwellings or other dwellings. Buyers of HUD homes can be of any income level, providing they can pay for the home in cash or qualify for a mortgage loan. Individuals planning to live in the homes themselves are given the opportunity to purchase the homes first and then investors are considered potential buyers if a buyer is not found that plans to live in the residence. There is a ten day period in which HUD homes can be bid on. Priority is given to the highest bidder that plans to be a resident of the home. After the listing period of ten days, property that is still not sold is then open for bids on behalf of people planning to rent the home out and etc.
There are some things to consider when deciding if a HUD home is the way an individual wants to go about purchasing a home. One benefit is that the realtor’s fee (commission) is paid by HUD and bids on HUD homes must be made through a real estate broker. The broker submits the bid by telephone or on the internet. When deciding what to bid on a home, potential buyers would be wise to know what a similar residence in the same neighborhood has sold for in the recent past. Before bidding, the potential buyer should also ask how long the property has been on the market. If the house has been on the market for some time then the bidder might consider a bid somewhat below the listing price. Many HUD home buyers can qualify for both low down payment mortgages (possibly as low as 3%) and for HUD to pay for closing costs on the mortgage. It must be noted in the sealed bid that the offer made by the potential purchaser is with the understanding that HUD will pay closing costs.
One drawback is that HUD homes are sold in as-is condition and therefore potential buyers should have the home inspected for all aspects of potential problems with the home such as electrical problems, foundation defects, termite infestation/damage and etc. The buyer of the home will have to take financial responsibility for all repairs to the home, including all problems existing at the time of purchase. The 203 (K) HUD loan program is available in some areas and allows the HUD home buyer funds to make needed repairs to the property and pay the loan back with the mortgage payment. Real estate professionals selling the home should know if this program is available in the area or not.
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