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Financing And Bidding On An Arizona HUD Home. . . A Buyer How To’s

May 16

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

HUD_LogoIf you are thinking about buying a HUD home you need to know the type of financing you will need if you are not a cash buyer, what you need to do before you place a bid and what’s involved in the bidding process. Its not that the bidding process is complicated, but submitting an offer on a property is nothing like submitting an offer on a non HUD property. In addition should your offer be accepted the paperwork that is required can be daunting. These properties are owned by the government, their required paperwork must be completed error free in order to complete the sale successfully.

Find a Certified HUD Broker who can assist you in locating properties that fit your criteria

The first thing a buyer needs to do is find a Certified HUD Broker. All bids can only be submitted by a HUD Broker.  By the way Thompson’s Realty is a Certified HUD Brokerage firm.  Yea for us!  Since all HUD properties are listed on the MLS, we can search for properties that fit your criteria as well as create an automatic search that sends you new properties as soon as they come on the market.  You should know that  HUD has already had these properties appraised and inspected and priced the property accordingly.

Senior couple meeting with agentHave your agent run comps and make every effort to view the property and do your Due Diligence.

It is advisable to have comps done in the area. If you are an owner occupant buyer you need to physically view the property. You should not bid on a HUD property that you have not seen. HUD properties are sold “As Is”. No repairs will be made. Your HUD Broker can get you access into the property prior to submitting your offer. You will need to assess the condition of the property and determine the costs for any repairs. These costs should be added to your bid amount, If you are a contractor, rehabber or investor with contractor resources we still advise you to try and see the property. Do your due diligence, look at flood plain status, assessments that may not have been paid, easements and insurability. HUD will clear up unpaid assessments, but this may cause a delay in you closing.

Loan for home that needs repairsTalk to you lender if you are going to get financing to determine what type of financing you will need.

HUD homes can always be purchased using cash, conventional, or other special financing. However, FHA via a HUD approved lender, offers financing options that are tailored for HUD homes.  In my last post that focused on the Four Types of HUD properties,  I covered the FHA 203b Repair Escrow type loan for “IE” HUD properties, where the property has less than $5,000 in repairs needed. I also covered the FHA 203K Rehab loan for an “UK” HUD property where the property has more than $5,000 in minimum property standards repair. You will need to discuss which type of loan and the amount of the loan you will need with your lender if the property you are bidding on needs repairs.

HUD will contribute 3% towards your closing costs in most situations.

HUD will pay up to 3% of the purchase price in closing costs in most situations.  The amount of the closing costs must be reasonable and customary in the area where the property is located. That said you need to remember that higher closing costs, coupled with the commissions to the agent, will reduce the Net to HUD and may have an affect on the competitive bidding ratio.

Review the bid statistics to get an idea of the list to sales price

Don’t fool around, make a realistic bid. These homes are priced to move quickly and your bid will not be countered if it is too low. You can make another bid, unless someone else outbids you during the round. The seller is the government, they are not empathetic to your situation. . its a bureaucracy and its just the way it works.

Bidding on a homeOnly a HUD Broker can place a bid for you, specific information is required as well as Earnest Monies

Your HUD Broker will ask you for personal information, names of the buyers, how you will take title (consult with a professional to determine), your address, phone number, amount of bid, closing costs, copy of your loan approval letter or proof of funds if you are a cash buyer and whether you are an “owner occupant” or an investor. In addition you will need to deposit earnest money with your HUD broker prior to your agent making an offer on your behalf. If the purchase is less than $50,000 the earnest money amount is $500, if it is more, it is $1000. The earnest monies must be either a Cashiers Check or a Money Order.

We will also ask that you have filled out the HUD Contract. This will not be submitted at the time of the offer but only after your bid is accepted. It is mandatory to have it filled out in BLUE INK and only original live signatures are accepted.

Once the offer and documentation are submitted the response time is quick . . .

It will only take about 24 hours for the bid to be accepted or not. If it is not accepted, the property will remain on the market. If the bid is accepted you will be notified by your HUD Broker who will have received notification via an email from HUD. The listing itself will also say “Offer Accepted.”

Inspection Report and KeysYou will have 15 days to complete your home inspection and close of escrow must be within 45 days

Although you have an accepted bid, you are not actually “under contract”, but you are definitely on your way. The execution of the actual contract by HUD will usually take a week to 10 days. After contract acceptance the buyer has a fifteen day period to activate utilities and complete a home inspection. Within the 15 day inspection period you will have three days to have utilities turned on at your expense. Utilities must be turned off at the end of the three day period. All sales must close within 45 days unless an approved extension has been granted.

If you have an interest in purchasing a HUD home, would like to receive HUD home listings that are currently on the market or have us notify you of any new HUD homes when come on the market contact us. We will be happy to help you out with that.

For further reading about HUD homes check out my past posts

HUD Homes Are Hot. . But What Are They?

There are Four Types of HUD Homes. . What Does That Mean To A Buyer

Hud Homes Exclusive Listing Periods. . What A Buyer Needs To Know

Written by Howard Harris