If you are in the market to buy a home you might save big money if you buy a Department of Housing and Urban Development (HUD) foreclosure house. This is because of several reasons. First of all, the house will be sold at no more than fair market value, so the government is not out to make a big profit on the home. In addition, although this will not apply to all HUD homes, if you buy a home through HUD that needs repairs, you can save additional money.
There are also programs that can help certain people to save money on HUD homes, whether are not they are being sold as the result of a foreclosure. For example, if you are a public service professional, such as a policeman, firefighter, or school teacher, and are willing to work in certain areas, you can save huge money.
HUD residential foreclosures are available throughout the United States. The process for buying isn’t the same as if you purchase a home from an individual. There are some things you should know.
The Federal Housing Administration (FHA) provides federal mortgage insurance for HUD houses. If there is a foreclosure on a home that was purchased with a loan insured by the FHA, the lender can lay a claim for the balance of the mortgage. The FHA will then pay that claim and transfer ownership of the home to HUD to be sold.
All HUD homes that will be offered for sale are appraised and then offered for sale at fair market value. In other words, the government will not try to make a profit on the home, so a potential homebuyer can save money based on that fact alone when buying a HUD foreclosure home. In addition, if the home is in need of repairs, the sale price will be adjusted downward, so if you don’t mind making repairs to a house you buy, you can save money in two ways at least by buying a HUD foreclosure house. All HUD homes are sold as is.
You must work with an agent to buy a HUD home. All HUD homes are sold through a bidding process. During an Offer Period, HUD will accept a bid from you through a real estate agent. At the end of the Offer Period, all bids will be open. HUD will accept the highest offer, or the bid that brings it the highest net dollar amount.
You will be notified within a day or two if your bid is accepted. You will be given a settlement date that is usually 30-60 days from the date of your accepted contract.
Another way that you can save money when buying a HUD home is that the real estate agent you worked with will receive a payment of up to a 6% commission on the sale of the home. You won’t have to pay the commission. You should know, however, that the agent must put in writing that he will be paid through a HUD commission.
HUD will not finance your purchase of a HUD foreclosure. You will have to arrange financing. You should have financing prepared before you make an offer. If you make a bid on a house, and your offer is accepted, you might lose any earnest money you have put down as a deposit, if you do not buy.
You should have any house you are considering buying through HUD inspected. That will help you determine a bidding price, if repairs are required. If the house was built prior to 1978, it may contain lead paint. For that reason, you should learn more about paint hazards before making a bid. You should also consider, before making an offer, asbestos content and other possible environmental hazards, such as buried storage tanks.
During the initial offering period, houses will only be available to those who want to live in them, so you would not be able to buy a HUD home, at that stage, for an investment. Only if a possible owner-resident does not make a bid, are prospective investors allowed to make a bid. If HUD houses are not sold within six months, HUD will sell them for $1 each to approved government agencies and nonprofit organizations. Housing will then be created for those in need or to benefit neighborhoods.
There are specific HUD programs that can help a person save money when buying any HUD house, whether a foreclosure or not. If you are an evacuee that has been displaced by Hurricane Katrina, Hurricane Wilma, or Hurricane Rita, you might be able to save 10% on the purchase price of a home. There also may be money available for repairs.
In addition, Good Neighbor Initiatives might help you save 50% on the price of a home, if you are a policeman, firefighter, teacher, or emergency medical technician, and if you are willing to buy a house in an area in need of revitalization.
If you are interested in saving money buy buying a HUD foreclosure, click on the “Houses for Sale” link on the official website of HUD, www.hud.gov.