What's HUD and What's a HUD Home?
What is HUD?
It might be a short texting acronym for How yoU Doing.
It is actually The Department of Housing and Urban Development.
Check them out yourself here: www.hud.gov
What exactly is a HUD Home?
HUD is a government agency. The Department of Housing and Urban Development. They back up FHA Loans and when these default, HUD can end up liquidating the assets on the open market or through other channels. They also promote home ownership, so they can offer first time home buyers some good options through their various program. In addition in these tough times they are heading up the government directives like "Making Home Affordable" program.
Learn more about Making Home Affordable here: http://www.makinghomeaffordable.gov/
According to their web site:
"HUD's mission is to increase homeownership, 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 leverage resources and improve HUD's ability to be effective on the community level. "
So what does this mean to you?
Well HUD works with FHA, The Federal Housing Authority, which is actually a part of HUD itself. When someone defaults on their FHA guaranteed Loan or Mortgage, then the house can end up going back to HUD to liquidate if it hasn't been successfully sold previously by the bank or the home owner in a short sale.
If a house is very upside down, it may be destined to go back to HUD's liquidation department, because FHA has minimums they are allowed to take in a Short Sale. These minimums are based on the original purchase price, appraisal and loan amount. So if a house was way over-priced a couple years ago or has really declined in value, no buyer will be willing to pay what FHA is required by law to take as a minimum amount. Then the home goes back to HUD to liquidate, they have the leeway to go below these minimums and meet the markets price.
HUD uses MCB - Michaelson, Connor and Boul, for the State of Colorado and in Montrose as a REO asset management and liquidation company.
MCB handles all liquidations for HUD in a region of the United States including Colorado. http://www.mcbreo.com/st_comain.htm
According to their website, MCB covers the following states for HUD:
- Arizona
- Colorado
- Michigan
- Montana
- Nevada
- Utah
- Wyoming
HUD hires one Real Estate agent for a very large multi-county region, they get a small amount of money for listing each of the properties in the MLS.
For the Montrose Colorado area this agent is Marilyn Hammar. Please don't call her. She just puts the listings into the MLS for the Government. She doesn't do photos, she doesn't inspect the properties, she doesn't have knowledge of them beyond what she is provided...
Here is a link to a list of all the local listing Brokers for MCB REO in Colorado. Use these names for your local agent to easily search (by agent) all the HUD homes in an area...
http://www.mcbreo.com/colorado/collb.htm
In cold regions and seasons, HUD will typically have the homes winterized and secured with a standard key that is the same for all HUD homes in an area. This allows any agent to show the home (as long as they have a HUD key in their office).
A Real Estate office and its Broker Owner (here at Century 21 Action Realty in Montrose Colorado, that is Ninah Hunter - www.c21actionrealty.com ) must be registered with the company responsible for liquidating HUD assets in your region in order to make offers on properties.
Registration is not hard but does require some paperwork. Once a company is registered any of the employed agents or brokers can submit HUD offers on behalf of their buyers.
Sometimes HUD properties will be featured in auctions, online or offline. Here in Colorado MCB allows electronic bidding online.
Just like with Bank Owned properties don't expect HUD to fix a lot of things for you. You are better off documenting the need and reducing your offer price and then taking care of these things yourself.
HUD/FHA do offer a "K" Loan (a smaller streamlined version of their 203K Rehabilitation Loan). The "K" Loan allows a buyer to finance in and escrow the repair costs for the home. The repairs must be cosmetic and not structural in nature and are limited to $35,000.
The FHA 203K Loan will handle structural repairs but it is a lot more paperwork.
The "K" Loan is perfect for repainting, replacing carpet, tile or linoleum, etc.
The 203K Loan grown up version can be used on a complete gut and remodel, an addition, etc.
Both the "K" Loan and the 203K Loan lend based on the "after repaired appraised value", then the draws for repairs or improvements are handled like a construction loan. Here is a link to the governments page about these loan programs. Check them out if you are a buyer, a Realtor, or even an owner stuck with a property in need of a lot of rehabilitation.
http://www.hud.gov/offices/hsg/sfh/203k/203kmenu.cfm
So what are you waiting for go out and buy a HUD home today... Just kidding, but it sounded good.
If you are in the market already for a house and you are looking for something that might need a little work, a HUD home is a great place to look...
But a Realtor is really the best place to start, because they will have HUD homes, REOs, short sales, desperate sellers (divorce, illness, death), retail secondary market, new construction, etc. They allow you the best shot at looking at the whole market. But it never hurts to look around a bit on your own.
Check out my websites for properties, homes and information about the Montrose Colorado area.
www.SoldCORE.com
www.COrmsbee.c21actionrealty.com
www.MontroseGoldTeamBlog.com
Hope this helped you get a better understanding of what a HUD Home is and how you might go about looking at one.
If you want to buy or sell a home in Western Colorado, especially in Montrose and the surrounding areas, give me a call.
My name is Chris Ormsbee and I can be reached on my Cell phone at (970) 209-0252.
