by
On May 8, 2013
Listed in Blog, Buyer Info

HUD homeLet’s start with a quick description of a HUD Home. Basically, it’s a home that has been foreclosed. What’s the difference between a HUD Home and any other foreclosed home (or bank owner or REO)? The only difference is that the loan for the previous owner was FHA insured. When there is an FHA loan on a house that has been foreclosed, it becomes a HUD home. HUD is a government agency, that handles the sale of “government owned” properties that have been foreclosed on, among other things.

In the past, HUD Homes have had a bad vibe associated with them. Nowadays, there are homes that are in pretty good shape, some even newer that are for sale and yes, there are still some beaters that need TLC.

Anyone can search for HUD Homes that are for sale by going to the HUD Home Store website. On the home page, you can select the state, county, city and other criteria that you’re interested in. If there are homes available in your area, a list will appear with basic information on the home.

There is certain protocol that needs to be followed to purchase a HUD home. First, you need to work with a real estate broker that is APPROVED to bid on HUD Homes. By the way, I happen to be one of those brokers. Next, you want to make sure you are working with a lender who is well versed in HUD homes and has the patients for it as they can be a bit tricky and very time consuming. Following is a list of things that are good to know:

  • One of the good things about HUD Homes is that the list price is also the appraised price. So you know that if a HUD Home has a price of $250,000 it was recently appraised by the HUD Appraiser at that amount.
  • If you bid more than the asking price, you will have to bring in the difference in CASH. So if the home is $250,000 and you offer $260,000, you will have to have $10,000 in cash to make up the difference plus your closing costs.
  • When you want to make an offer on a HUD Home, you have to use an approved broker (ahem) to submit a bid on your behalf.
  • The first 10 days that a property is on the market, HUD will review all bids on the “bid submission deadline”. If there are no acceptable bids, then they will review bids daily until one is approved. The first 30 days they will accept bids from owner occupants, non-profits and government agencies. After that, it’s fair game to anyone.
  • If you’re bid is accepted, you only have 3 days to get the original signed contract (on HUD forms) and your earnest money deposit in the form a cashiers check or money made payable to both you or HUD for $1000.
  • HUD will usually select their preferred title and escrow. You can choose your own, but may be subject to hire fees. The fees may be well worth it because escrow companies that are dedicated to HUD can be overwhelmed and cause many delays.
  • Once you get past the initial bidding process and are accepted and submit the paperwork, everything else is pretty standard stuff.

Calle San Felipe SJCHere is an example of a HUD Home for sale in San Juan Capistrano, CA as of the date of this post.

Price $320,000

Bedrooms: 2 Baths 1.5

It’s been on the market 5 days, so they will review any bids received between the list date and day 10 in five more days.

If no bids are accepted at that time, any new bids will be reviewed daily.

If you’d like more information on HUD Homes or any other properties for sale in Orange County, you can call 714-396-2819.

 

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