September 6, 2011
In our last blog post we discussed HUD homes and who can buy them. A HUD home is a one-to-four unit residential property which was originally purchased with an FHA mortgage.
The loan went into default and foreclosure, and became the property of the Department of Housing and Urban Development. To cut its’ losses, HUD offers these homes for sale at a discount.
According to the FHA official site, “HUD Homes are sold ‘as-is,’ without warranty. That means that HUD will not pay to correct any problems. But even if a HUD Home needs fixing up – and not all of them do – it can be a real bargain…”
FHA adds, “HUD’s asking price on the home will reflect the fact that the buyer will have to invest money to make improvements. HUD might offer special incentives such as an allowance to upgrade the property, a moving expense allowance, or a bonus for closing the sale early. And keep in mind that on most sales, the buyer can request HUD to pay all or a portion of the financing and closing costs. Your real estate agent will have details.”
The buyer can’t simply make an offer on a HUD home–there is a bidding process required and a participating real estate agent must bid on behalf of the buyer.
We encourage you to get the home professionally inspected before you make an offer so you will know what repairs you may have to make BEFORE you submit your bid. The FHA rules for HUD homes, also known as REO properties, includes the following:
“Normally, HUD Homes are sold in an ‘Offer Period’. At the end of the Offer Period, all offers are opened and, basically, the highest reasonable bid is accepted. If the home isn’t sold in the initial Offer Period, you can submit a bid until the home is sold. Bids can be submitted any day of the week, including weekends and holidays. They will be opened the next business day. If your bid is acceptable to HUD, your real estate agent will be notified, usually within 48 hours.”
Once a bidder is given a settlement date, which is usually 30 to 60 days later, he or she can arrange financing and close the deal. Those with approved bids on a HUD home can apply for FHA loans, including an FHA 203(k) Rehab loan for fixer-upper properties.
If you’re interested in seeing a list of HUD homes and HUD-approved real estate agents, have a look at the official site for the HUD Homes program: http://www.HUD.GOV/HUDHomes
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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