HUD homes can be a great bargain but purchasing one is very different from purchasing a home from an individual. Pointe Realty Group is here to help you understand what a HUD home is and how the buying process works.
What is a HUD Home?
HUD.gov defines a HUD home as “a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.” Basically, this means a foreclosed home now belongs to the U.S. Department of Housing and Urban Development and is going back on the market so that the government can unload the home to, presumably, make their money back.
Why Buy a HUD Home?
The government does not want to hang on to these foreclosed homes for any longer than they have to, so most of the time the homes are priced below market value to encourage a quick sale. In addition to a good price, many times HUD will offer special incentives to buyers that are in a certain geographic market or that satisfy certain qualifications. One example of this is the HUD “Good Neighbor” program. This program offers HUD homes in revitalizing areas at a 50% discount to teachers and full-time law enforcement officers who plan to live in the property for at least 36 months. Another perk for HUD home buyers is the HUD gives preference to buyers who plan on using the home as their primary residence so you will have a better chance of getting the house compared to those who are buying with the intention of using the property as a rental or for “flipping” (purchasing, renovating, and then selling quickly).
One thing to remember when you are looking into purchasing a HUD home is they are sold “as-is”, meaning that the new homeowner is responsible for all the repairs and improvements. You should have a professional home inspection done before you make an offer. This will help you determine the bidding price and see what kind of repairs will need to be done.
HUD Home Loans
All financing options are available for HUD homes and your real estate agent, as well as your mortgage or lending provider, can help you determine what type of loan would work best for your situation. If you are buying a home that will need a lot of repairs, you should look into a loan that offers the ability to include the renovation costs.
How to Buy a HUD Home
HUD homes are listed on HUDHomeStore.com. You will not find them listed on conventional real estate sites through local MLS feeds. HUD foreclosures are sold through an auction or bidding process. You must hire a licensed real estate agent to assist with the process. There will be an offer period where interested buyers submit a bid through their agent. After the offer period has closed, HUD reviews the bids and will either choose one (usually the highest bid) or HUD will extend the auction deadline if they do not find a bid that is deemed acceptable. Your agent will help you come up with a price that you are comfortable with bidding that will also give you the best shot at winning the bidding process.
Overall, buying a HUD home can help you get a great house at a good value. Remember to always get a home inspection and work closely with your Pointe Realty Group professional so that your buying experience will be a pleasant one!
Ready to Find Your HUD Home?
Kathryn Strickland, one of our Lake Gaston Agents, has extensive experience with HUD homes and would love to answer any of your questions. Contact Kathryn to start your search.