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HUD Homes Are Hot. . . But What Are They?

Apr 25

filed under: 2nd Home Buyers, Buying A Home, Foreclosures & Short Sales, Real Estate

1411 W. Libby St. Phoenix, 2324 SF $154,800

1411 W. Libby St. Phoenix, 2324 SF $154,800

If you have been trolling the public real estate sites lately looking at properties have you noticed how many of the listings  are coming up with the words “this is a HUD home” in the listing remarks or description? Here’s the deal,  HUD homes are gaining a lot of traction in the past few months. Often they are lower priced properties and can be purchased at a significantly reduced market value. Because there are many nuances to buying  a HUD property, I will be blogging about HUD properties in a series of posts. Because these posts are to educate you about what’s involved in buying a HUD property, be prepared for a “yawn” now and then.

What is a HUD Home?

A HUD Home is a property that had a prior FHA insured mortgage that went into default. The lender took back the property, submitted and FHA insurance claim and then conveyed ownership of the property over to the U.S. Department of Housing and Urban Development (HUD). HUD then sells the property through an Asset Manager who assign a  HUD registered Real Estate Broker to sell the property. A HUD Home can be a single family home, town home, condominium, mobile home or multiple family attached home up to 4 units.

Who can buy a HUD Home?

6313 W. Pomo St., Phoenix, 1247 SF $59,400

6313 W. Pomo St., Phoenix, 1247 SF $59,400

Hud Homes can be purchased by any individual, a company, HUD-approved non-profit organization, or government entity that can obtain financing or pay cash for the property. Because purchasing a HUD home is done via a “bidding” process any offers must go through a HUD-registered real estate agent. Just so you know our brokerage firm is a HUD-registered agency so you can submit a bid for a property with us.

There are two main classifications of  home purchasers, they are Owner Occupants and Investors. The  HUD definition of an owner occupant purchaser is a person who will occupy the property within 30 days of close of escrow as their primary residence for at least one year and has not purchased a prior HUD home as an Owner Occupant within the past two years. Investor buyers are people that purchase the property as an investment or as a second home, or who do not qualify as an Owner Occupant.

How can you buy a HUD Home?

1405 E. Atlanta St. Phoenix, 1610 SF, $51,300

1405 E. Atlanta St. Phoenix, 1610 SF, $51,300

If you plan on financing your purchase, HUD requires you to be pre-approved for a mortgage (have a preliminary loan commitment) in an amount sufficient to purchase the property. If you are paying cash you will need to provide proof of funds. Once we have identified the appropriate HUD property for you we will submit your offer/bid online. All offers are submitted online.

In a typical real estate transaction, which this is not, your offer would be submitted directly to the seller who may counter your offer. A negotiation process would take place until mutually agreed upon terms were reached or until the terms were rejected and you as the buyer would move on. With a HUD home purchase, there are no negotiations between the buyer and seller, no back and forth haggling over price. These homes are sold by a sealed bidding process, where all buyers submit their best offer online and usually the highest “netting” bid (after all costs are paid) wins the sale.

In my next post about buying a HUD property I will cover the the four types of HUD properties and how they determine the amount of time they are on the market for sale and the eligibility time frames for you to bid. In the meantime if you would like to review some HUD property listings that are currently on the market contact me and I’ll get on it right away for you.

Written by Howard Harris