Buying HUD Foreclosures in Austin Texas

Many of you have been seeking assistance for properties and asking me questions regarding buying foreclosures since my last entry on buying REO foreclosures in Austin. Some of the questions addressed HUD foreclosures which are very different from buying bank owned properties. These are great property opportunities for both prospective home buyer and investors as well. Here is a brief back ground on HUD Foreclosures in Austin.

HUD foreclosures are defaulted FHA loans which have been foreclosed. This happens because HUD oversees the Federal Housing Administration which provides federal insurance against default on mortgages. If a mortgagor defaults, FHA files a claim against the amount owed and title is conveyed back to The U.S. Department of Housing Urban Development making it HUD owned.

HUD foreclosures can be found within normal MLS listings.  If you find a property that interests you, you have to have a certified HUD broker assist you in order to show properties and place bids on your behalf. You can not bid on properties on your own. The process of buying HUD homes is very intricate and extremely time sensitive. I will only touch on a few points here.

The way you purchase a HUD home is by way of bidding. Similar to auction bidding, the highest overall bid wins including commissions, closing costs, or any other costs involved. Once you find a home you can find a report done by the M&M which is a Marketing and Management Contractor who performs an inspection for HUD and maintains the home during the listing process. You can not bid unless you have a pre-approval letter as is pretty much standard as with all properties now days. In the event of a highest bid all paperwork must be sent in to the regional office within 48 hours c/o your HUD broker representative. Fortunately the regional is here in Austin so there is ever so slightly more time. You do have normal inspection times and once the contract is signed expect 45 day or so for closing.

What You Need to Know

• I think the first thing you need to know is that similar to an REO, you are better off understanding the move in costs. Missing appliance(s) or cosmetic work generally is needed, such as carpet, paint, and minor repairs. Every house will vary.
• You may not win the bid. If you have ever competed for an item, on eBay, you will find that is some cases you will lose. This is also a possibility here as well. Pricing is key. Understanding strong offers is key for success.
• If you are an investor, in my experience it seems that owner occupants are favored more. Even if you come up with a better bid, sometimes it will not be acknowledged and you may lose out.
• Dealing with the government can be trying. The time lines and details to the paperwork are tedious yet necessary. Even so much as not providing a date after your signature during the offer phase can reject your offer. This can frustrate buyer/investors, but if it is done right the first time, there should be no worries.
• There are different bidding periods and time lines when dealing with a HUD home. Be sure to understand the different periods and acknowledgment time frames.
• These properties are truly “as -is” and there is no exceptions.

These are just a couple of aspects when dealing with HUD homes. Similar to REO foreclosures, there is great value in successfully buying a HUD home, more so IMO than REO because it seems that there is more room for negotiations in price.

For more information or some examples of great HUD properties simply e mail me and I will send you a current list of properties on the market.

Christopher

RE/MAX Capital City

Buying REO Foreclosures in Austin

In the last 2 months foreclosures have risen slightly in Travis and Williamson but more so in Williamson County. What this means that in the next months there will be more foreclosures on the market soon for buyers to potentially get better deals on just in time for the buying season. I thought it would be a good idea to briefly point out some points to keep in mind when purchasing REO properties.

What is an REO Property?

REO stands for Real Estate Owned, which basically means that the bank acquires the property due to a foreclosure or deeds in lieu of foreclosure.

After the foreclosure process has completed and the bank regains possession, in most cases the property is assigned to an asset manager who interns works directly with a Realtor. The Realtor then goes and assesses the condition and suggests a fair listing value in current condition so the home can be sold. As with all foreclosures, there is no information about the condition of the property, no ability to obtain documents from the previous owner, and the property is sold as is. This means that there are no negotiations for repairs in most all cases.

So how does a buyer or beginner investor find an REO?

Even though there are some pay sites that may give you information such as pre-forclosures watch lists, short sale lists, and foreclosures lists, most all of REO properties end up on the regular MLS. I normally set up a search for my clients where I can set up specific verbiage to filter out and produce the most accurate results for REO properties. That and I work closely with a Realtor colleague who works only with REO properties. I know when she will receive new properties prior to listing then I simply give my clients the heads up.

So how does a buyer approach an REO property to offer on?

Through a Realtor. There is no negotiating directly with the bank for many reasons. One main one being that the bank wants representation from their preferred Realtor to perform the job of selling the property for them. (You would want to have Buyer Representation on your side as well) The REO Realtor fields any inquiries, handle paperwork and procedure, and serve in the bank’s best interest. There is no reduction in price in lieu of a Realtor’s commission on either side as it is already built in to the agreement from the bank, so it costs nothing to have some one on your side that knows how the process works as it is intricate. Most banks want a quick close normally within 30 days or less so this is more likely if both sides are properly represented.

How do I determine the best offer price?

How much depends on carefully analyzing all the factors and condition of the home.

One thing to mention is that REO foreclosures are a hot commodity now especially with the attention that it has gathered in the main stream media. (particularly sub $200K) The difference for Austin is that our market does not have an excess of foreclosures where the market is flooded with them when compared to other markets like Dallas for example. Further, this means that there is more competition from able buyers/investors here locally which leaves little room for procrastination and low ball offers. Just a another indication that our market is a healthier one than most. So be prepared to act because if you don’t someone else will.

What are the costs involved when buying a REO?

Since there is no information about the property, it is detrimental to be as thorough as possible. This means be prepared to have inspections on everything. Not only a home normal home inspection but if the home has a pool or a septic, you will want to inspect those too. Also you will have to buy a survey in most cases (as a lender requirement) if there is not one on record at the county which for a normal home can cost around $400-$500. Be prepared for the upfront costs. While some of these costs can be negotiated in some cases its better to be prepared than not.

Most properties also have missing appliances such as refrigerators, in some cases ranges, dishwashers, washers, and dryers taken by the previous owners. Also in some cases flooring, sheet rock damage, and general repairs may be needed. Every property is different however especially in different price ranges. Normally I notice higher priced homes have less damage.

So what is the benefit of buying an REO?

Even though there are upfront costs, the benefit comes into play by way getting a house that is less than market or new. What I advise people is to have vision and I help estimate costs to personalize. Know the cost to fix things or using sweat equity can go along way in terms of cost saving. If a house can be had under value and it is livable, changes and projects like new paint, flooring, and counter tops can be done over time. So many times buyers want a house to be perfect to move in immediately and can fore go a great opportunity to save. Remember a home is not a quick profiting vehicle. Value and equity come over time.

For more information or some examples of great REO properties simply e mail me and I will send you a current list of properties on the market.

Christopher

RE/MAX Capital City