Success With Selling HUD Owned Properties

HUD, do you know what it stands for? If you do, then you probably have been involved in the sale of a HUD owned property. If not, it stands for Housing and Urban Development. HUD's mission is to increase home ownership, support community development, and increase access to affordable housing free from discrimination. To fulfill this mission, HUD will embrace high standards of ethics, management and accountability and forge new partnerships--particularly with faith-based and community organizations--that leverages resources and improve HUD's ability to be effective on the community level.

How do you buy a HUD Home? First thing is to work with a HUD registered real estate broker agent within a HUD registered real estate office. If you already have an agent that you prefer to work with, but they are not HUD registered, your agent can work with the listing agent of the HUD Home you wish to purchase so your the offer process goes smoothly. When a property is first offered for sale, they initially are offered to owner-occupants (someone who is going to live in the home as their primary residence). After the initial offer period, if the home remains unsold it is then offered to all buyers, including investors. If I have an investor interested in a HUD Home, I have found that putting an offer in during the initial period is wise since there may not be an owner-occupant offer. If that is the case and the offer amount is within the parameters set, the investor has a good chance at purchasing the property.

How to find HUD Home listings? All properties are offered for sale on Internet listing sites and entered into your local MLS by the listing agent. I actually have a special link on my website www.LawrenceburgHomesInfo.com to one of these listing sites. There is good information there and you can search by city and state. Of course, if you know what phrases to look for on an MLS listing you can identify them by searching listings on your local MLS. HUD registered real estate brokers can help by sending you updates by email on new HUD listings. In our area, new listings are added once a week along with reduced price listings and listings that have had their offers or contracts canceled.

Are there Special Program? Yes there are! If you were a hurricane victim of Katrina, Rita, or Wilma HUD can sell you a HUD Home at a discount. There is also a program called "Good Neighbor Initiatives". This program offers fireman, law enforcement officers, teachers, emergency medical techs, nonprofit. and local governments certain properties at a reduced sales price. These special properties are usually not listed in your local MLS, but are offered for sale on Internet listing sites for a specific time frame before it is offered to the general public which includes investors.

What to do about inspections? I always recommend a home inspection, even though HUD Homes are sold "as-is, where-is" and they will not make repairs, a buyer needs to be aware of any major repair that may not be evident to the naked eye. A home inspector can uncover and find defects that the rest of us don't know how or where to find them. Termite inspections are required by FHA loans and if there is no evidence that the property has been treated recently, you need to get an inspection no matter the type of loan you are getting.

Financing? HUD does not offer financing. Some HUD Homes qualify for FHA-insured loans so you need to shop around for the best rates. One incentive that HUD offers is a $100 down-payment if you are obtaining an FHA loan. Not all lenders will go for the $100 down-payment though. The typical amount to have for a down-payment on an FHA loan is 3.5%. Most lenders now-a-days feel that a buyer needs to bring something to the closing table. Their research has shown that buyers bringing money to the table are less likely to default on their loan. Several HUD Homes qualify for 203b FHA loan with escrow. This means that HUD has identified some repairs that the home needs, such as HVAC, carpet, paint, plumbing repairs, etc. This loan allows the borrower to add the dollar amount HUD has determined it would take to make these repairs to their mortgage loan, this amount is less than $5000. There is also an FHA 203k loan. This loan allows the borrower to borrow repair money which is $5000 or more for repairs and is included in their mortgage loan. HUD does not list these repairs and if this type of loan is used you have to stabilize or replace lead-based paint in older homes along with the other repairs, if it hasn't already been taken care of. There are other loans such as conventional, rural housing

How long do you have to close on a HUD Home? If you are paying cash, you have 30-days. For a FHA 203b, 203b with escrow, or conventional loan you are given 45-days. When obtaining an FHA 203k loan you have 60-days to close. If you can not close because of loan issues or something viable, you can request an extension but they can charge a daily rate for not closing on time if you don't have a good reason.

Remove the stress? The process of purchasing a HUD Home is very different than purchasing regular homes for sale or even a bank-owned home. Several Realtors have lost offers because they were not aware of the ins-and-outs of putting in offers on HUD Homes and the time specific process. I offer my expertise to other Realtors by doing the paperwork and making sure the offer and contract periods go smoothly. In these instances, I never meet their buyers, I prepare the paperwork, enter the bids and advise the buyers agent on time specific procedures. If you are an agent in the Central Kentucky area, I can take the stress of the process off by working with you during the bidding and contract period.

Some of the information in this blog was taken from the HUD website, www.hud.gov, so that the information given is accurate.