Hi there! If you’re reading this article, then that must be because you want to learn of HUD Homes. Federal Housing Administration (FHA) insures loans for borrowers and in case of default pays the lenders. If a lender claims balance payments from FHA, the ownership of home is transferred to FHA. FHA then appraises that home to determine fair market value and sells these homes. When setting up a price, the cost of repairs is also factored in. HUD homes are not repaired and sold in same condition without repairs. New owners need to do the repairs.
If you will like to buy a HUD home, you can log into the website of FHA. Each state has set up website where you can find the listings of HUD homes. HUD sets up various real estate offices also which can show you the property as and when required. HUD employees work with agents only so as a homebuyer they will not entertain you.
HUD homes are sold at auction only. Buying a HUD makes good economic sense as due to repairs required, they usually fail to attract fair market value. With minor repairs they can be resold for profit. Say, a HUD home which is sold for USD 500,000, when its market price is USD 650,000, may need repairs for USD 50000. Once a buyer from HUD auction repairs the property, he/she can sell it at market price and make money.
Only catch is that person buying a HUD home must pay full amount in cash or must have a loan approved so new lender can remit full cost to FHA. If at auction you win the bid and then you fail to pay, your earnest money deposited beforehand will be forfeited. The settlement date for full payment is approximately 30 to 60 days away.
Investors can buy HUD homes, but first chance is given to owner occupants. Before buying a HUD home, whether for living there or for investment, it is best to get a professional to inspect the home. Professional inspection will help you determine cost of repairs fairly accurately.
If you are planning to buy a HUD home, employ services of a real estate agent. As such, FHA will work only with agents not with owners. Also, there is lot of paperwork required to participate in auction and even after you win a bid. It is therefore a good idea to use services of an experienced agent.
Real Estate agents get nearly 6% of each sale as commission from HUD. HUM homes come cheaper as in most cases some repair or other is required. Owner who have been unable to pay their mortgage usually do not do expensive repairs so condition of homes is not that good. If a buyer can invest in some repairs, he/she can resell the home at profit or live there also.
Every year thousand of homes are auctioned by HUD. In rare cases where a house put on auction by HD dos not get good buyers, they are sold off for a nominal sum to non profit organizations for housing the poor in that neighborhood.