When you see a HUD home for sale, you are looking at a home that’s priced to move and will sell as-is. These homes are owned by the U.S. Department of Housing and Urban Development. HUD foreclosures were originally financed with a FHA mortgage and have been foreclosed on because the original owner could no longer pay the monthly mortgage.
HUD government foreclosures are 1-to-4 unit residential properties acquired by HUD. Once HUD becomes the owner, they offer these homes for sale to recover the loss on the foreclosure claim. Whether you’re looking for an investment property or your first home, buying a HUD foreclosure is a great opportunity.
HUD foreclosures are typically priced 30-50% below market value and down-payments are low as well. HUD gives preference to potential buyers who will live in the home for at least one year although investors can bid on the properties too, after a pre-determined priority period. In addition, there may be sales allowances you can take advantage of which can be used for closing costs or home repairs.
With HUD government foreclosures, you don’t make a traditional offer but, instead, submit a bid through an auction process. To improve your chances of being the top bidder, consider looking at the cost of similar homes in your local market then come up with a reasonable bid. Also consider the condition of the HUD home before submitting your bid (you’ll be given the opportunity to view the house beforehand). If all of the bids are unacceptable (too low, for example), another auction deadline is created and sometimes the price is lowered. If you miss the opportunity to bid on a HUD home, it may come back on the market giving you a second chance to own it.
Be realistic when you’re looking to buy a HUD foreclosure. You are buying a house that has probably been sitting vacant for a long time and will likely need work due to neglect of the property. You need to know the difference between insured HUD homes and uninsured HUD homes. Insured HUD foreclosures need less than $5,000 in repairs while an uninsured HUD home will need repairs in excess of $5,000. This is an important point when considering how much time and money you want to put into fixing up the house. Get your own inspection done even if it means losing money because you have to back out of the contract. Make sure the house is in a neighborhood that you can see yourself living in vs. a rundown neighborhood that will bring down the value of the property over time.
Besides saving money, buying a HUD home also comes with other advantages. Gaining quick equity is at the top of the list. In addition, you don’t have to deal with an individual seller, which mean no negotiating. Also, as a real estate investor, purchasing a HUD foreclosure and flipping it can result in a large return on your investment.
Contact us today. We can help you find HUD homes for sale!