So, you've seen the advertisements and heard the words "HUD Owned" or "HUD Home" a lot recently - just what does that mean?
A HUD Home is a 1-4 unit residential property acquired by HUD (the Department of Housing and Urban Development) as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.
HUD contracts with local real-estate agencies to list these homes in the MLS for them. We go to the homes, measure them, take pictures, and enter all the information into the MLS and our websites. We have no agency relationship with HUD, meaning we don't represent them in the sale of the property, we only represent those who are interested in purchasing the property.
Only HUD authorized agents are allowed to represent potential buyers. We have special training on the forms and processes as well as the different financing methods to purchase these homes. We have developed relationships with lenders specifically geared toward helping potential homeowners with their purchases.
HUD offers homes for purchase in many ways, but the most common is listing the home for the first 10 days in an "owner-occupant" period - meaning only those who are planning on living in the home are allowed to purchase the home. Don't think they don't check either! After the 10 day period, the home goes into a Daily Bidding phase where anyone can make a bid to purchase the home. Periodically, homes are reduced in price, and each price reduction kicks in another 10 day owner-occupant period.
In order to purchase a HUD Home, potential homeowners that will need a loan will need to be pre-approved thru a lender for a loan and have proof of that preapproval. This is easily done. Also, if the home is offered at more than $50,000, they will have to have $1000 earnest money at the ready in the event their offer is accepted. If it's offered at less than $50,000, then only $500 earnest money will be needed. If they are paying cash, the earnest money rules still apply, but they need proof of funds, easily obtained by a letter from their bank on the bank letterhead.
Once you have your preapproval or proof of funds, a "bid" is made on the home. Along with the bid, there is quite a bit of paperwork the agent will go over with you. The agent will help you understand your rights to inspections, utility info (to get a good inspection), earnest money agreements, lead based paint disclosures, termite contract prorations, etc. etc. If the bid is not accepted, no earnest money is tendered, and you either make another bid or move on to a different house. If the bid is accepted, the agent has 48 hours to get the paperwork and the earnest money overnighted to the appropriate places.
After the paperwork is complete, the buyer typically has the right to an inspection, the agent should make arrangements with the buyer to get the inspection completed and will help the buyer with all the paperwork and extra tasks necessary to get the home thru the purchase process.
Just a note about HUD Homes. There is a very common misconception that HUD will accept lowball offers on their homes. This is simply not the case. They have a pre-set bottom dollar amount they want to net on each property at the list price. A seasoned HUD authorized agent can help you understand what an appropriate offer on each property might be.
So, if you're interested in a HUD Property, give me a call, I know the ropes, and can help make your purchase a smooth one. |