Someone else’s misfortune can turn out to be the answer to someone else’s prayer of buying a house. HUD homes are houses that have been acquired by the government due to foreclosure on an FHA-insured mortgage. These homes are then turned around and sold to the public for a discounted price.
Check your home buying eligibility. Start here (Nov 22nd, 2024)
Advantages of buying a HUD home
“I’ve been in the real estate business for 28 years, and HUD homes have always been around,” said Jack Gross, president of the Better Homes & Garden Real Estate Cassidon Realty in Bethlehem, Penn. “They list at their appraised value. But that doesn’t necessarily mean they sell at their appraised value.”
HUD does an appraisal on the property but also takes the advice of area brokers and real estate professionals’ opinions on pricing.
“They do sell at good prices and competitive prices. Sometimes, they are in need of a considerable amount of work. HUD is like any bank trying to sell a property that is distressed. The faster they can sell it, the better,” he says.
So, HUD makes periodic adjustments to the prices if it’s been sitting on the market for 30, 60, or 90 days. Some properties can cost as little as $1, depending on the city, the neighborhood, and any revitalization programs going on in that area.
Some qualify for 50% discount off listing price
However, through HUD’s Good Neighbor Next Door initiative, some people in certain professions can get a 50 percent discount off the list price of eligible properties. This incentive is to encourage the renewal of certain communities and neighborhoods by providing an opportunity for law enforcement officers, firefighters, emergency medical technicians, and teachers to purchase homes there.
HUD also offers community and faith-based nonprofit organizations a chance to buy HUD homes at discounts of up to 30%. These organizations then fix up the homes to sell back to low- to moderate-income home buyers.
Bids for the property must be submitted by a HUD-registered real estate broker. So, your best bet to check out if there are any homes in the area you want to live, go to the government website – hudhomestore.com. You can click on the map and find the state you want.
Every state is covered except Hawaii, which is not available at this time. But homes in Puerto Rico are listed. The listings usually show a few photos, the listing price, and information about the maintenance agency (that takes care of the property since it is empty) and the real estate agent or broker.
On the list, you might also see a house icon – this means it is a HUD showcase, which is a move-in ready home. They also signify with the word new if it is a recent listing. It also will say if the home is uninsurable, meaning you can’t get an FHA loan with it. People use cash or home equity loans usually to buy these types of fixer-uppers. If the home has an IE next to it, it means that an escrow has already been established with enough money to fix the required repairs prescribed by the FHA appraiser, and then you can get FHA lending.
“HUD gives first options to buyers that make acceptable offers who agree to occupy the property. It just makes the person more community committed. The person living there has a sense of ownership and takes care of it,” Gross comments.
He adds that during the mortgage crisis, about 30 percent of his business was HUD homes. Now that market is down to about 10 percent for his company.
Check your home buying eligibility. Start here (Nov 22nd, 2024)
Who is buying HUD Homes?
Judy Williams, a marketer, and concierge in Racine, Wisconsin, feels lucky to have bought a HUD home.
“The home had been foreclosed on the previous owners who had just purchased it a couple of months before we got it,” she says.
The only immediate renovation she and her family had to do was have a new sewer line installed before the water could be turned on. They bought the home outright with cash for $47,000. It’s worth about $130,000 today.
The home is a brick arts and crafts bungalow built in 1928 with hardwood floors, four bedrooms, two bathrooms, and a detached 2-car garage. It also includes a fireplace, an enclosed porch, a fully finished basement, and a backyard.
“When we decided to look for our dream house, we each had a list. And this house had them all,” Williams says. “My husband and I had just married about a week before the closing. Since we both are frugal and because the home met our needs, it was the best decision we could have made.”
The only snafu or problem that arose was the decision of whether to get a home inspection or not.
“We did find out that with a HUD home that things move quickly, and you have short windows of opportunity to get things done once you sign the purchase agreement,” she says.
The couple had about 48 hours to get a home inspection completed. However, they would have had to pay for everything to be turned on for the inspection (gas, water, etc.), and then they would need to pay to have it turned off again, until the closing.
“And even if the home inspector found something that we felt would be a problem moving forward, it would have been a moot point because we were under contract. And the only way can be broken is if high levels of lead were found in the home,” she says. “So, We knew we loved the home, loved the price, and since we had no children, we decided to forgo the inspection and simply move ahead with the deal.”
Check your home buying eligibility. Start here (Nov 22nd, 2024)
