Buying a forclosure from HUD (Housing and Urban Development) can be an easy process, believe it or not. You need an agent who has experience with HUD to make it a smooth transaction for you. As a buyer of a HUD home, you do not have the same luxuries as the buyer of a regular/resale home. Your earnest money deposit amount is pre-determined and non-refundable. If the property is $50,000 or less, the earnest money deposit (emd) is $500, if the house is going for more than that, which is normally the case, the emd is $1,000. The emd with foreclosed homes is non-refundable, so if you violate the terms of the HUD contract (which greatly varies from a normal REIN sales contract), you lose that money. You are not dealing with Mr. and Mrs. Selller but the government so the rules are firm. When you put a bid in (HUD will only accept bids from Realtors, so you do need one of these!) and it is accepted (YEAH!) you have exactly 45 days from that point to close. If you do not close in 45 days, you can lose your emd and have to pay $25 a day for every day you do not close past the 45. There are exceptions, but keep in mind this is the government and these are few and far between.
If you ave an interest in these homes, you need to get in touch with a realtor such as myself who has experience with them and can search the appropriate HUD sites for these homes. They are usually very good deals, but please keep in mind they are not for the average buyers. HUD homes are usually distressed and need work. Which means that you will need some cash to get the house right for you or to flip. Because most of them need work, financing can be hard. Make sure your loan officer is aware you want to look at HUD home. Conventional and VA financing are next to impossible to get with these home. Depending on the state of the home, an FHA loan is possible, as are s few rehab loans. This seems like tons to think about it, but I will try to summarize some tips to help the average buyer with the process. If you want more information than I have provided, I would be happy to discuss it with you further:
Tips for bidding on HUD Homes:
1. Check to see how long the property has been listed (ask your Realtor). You may be able to negotiate more "Buyer friendly terms" on a "stale" property (i.e. closing cost assistance or less than the asking price)
2. Properties in the best condition go for the highest price with the least amount of fees or closing costs paid by HUD.
3. HUD is looking for the bid with the highest net. Asking for all buyer fees paid and a lower price can reduce the chance of getting the bid accepted. If the house is great and listed low, you can always offer a little higher than the asking price if you really need closing cost assistance or just to increase your chance of obtaining the property
4. Check (ash your Realtor to do this) to see if the property has "popped" back on the market. This may give you clues as to the prior offer.
5. Investors: have an equity line ready and pay cash for the property....finance it later...it will make your bid look stronger
6. Properties with IE (insurable with escrows) and UI (uninsurable) are not for the "no cash" buyer. These properties are hard to get financing for and require time, effort, and money.
HUD properties are not for everyone but they are a great investment for the right buyer. HUD will only work with agents, so make sure you pick an agent with experience in this area. HUD is very particular about time frames, bid presentation, and their rules and addendums. If your agent is unfamilar with any of these things, the chances of your bid getting through are small. I hope this helped!
If you have any questions about this post or want to continue this discussion beyond the customary comment, email me at lizgermanos@yahoo.com. If you are interested in real estate in Hampton Roads and need an agent to guide, please feel free to also email me.
Friday, August 22, 2008
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