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
