Almost everyone has a dream home.  A place they like to wander through in their thoughts, choosing imaginary wallpaper and planting flowers out in the front yard.  But for too many people, dream homes remain just that - dreams.  The reality of owning their own home never seems to become theirs.

This is where HUD can help.  HUD, short for the U.S. Dept
of Housing and Urban Development, is a government agency created to make the American Dream of home ownership a real possibility for everyone. And that could include You! 

HUD helps make homes more affordable in several ways. One way is through it's own Federal Housing Administration Department (FHA) which federally insures home mortgage loans.   A FHA insured home loan allows you to purchase a home with as little as 3% down, instead of the normal 10% to 20% required by most lenders.  A second way HUD makes homes affordable is through the "re-sale" of government owned properties - or HUD homes.

What Is A HUD Home?

When a homeowner who has a FHA home loan fails to make the payments, the mortgagee (bank) forecloses and files an insurance claim with HUD. In exchange for paying off the unpaid loan balance to the mortgagee, HUD receives title to the property. At this point, the house becomes a HUD "government owned" home.

After the mortgagee conveys the property to HUD, the Management and Marketing Contractor (M&M Contractor) begins the process of managing and marketing the homes according to HUD guidelines.  The M&M Contractor secures the property, maintains the grounds, has it appraised for "as-is" value, determines whether or not the home is Insurable (will qualify for another FHA loan) or not and finally puts it back up for bid to the general public for purchase. 

For more specific information on bidding procedures and what's involved in buying a HUD home see our "Q & A report".

Buying a HUD Home is often much easier

Making an offer to buy a HUD home is often much easier than the process of buying a home on the private market.  Once you understand the rules of the HUD program, you'll know exactly what to expect and when. 

Unlike dealing with a private home owner there is no "haggling" or negotiating back and forth. No offers and endless counter offers re-negotiating every last little detail.  There's no ego's or inflated "self-pride of ownership" from the seller to worry about getting in the way.   There's no delays in waiting for an owner to "mull it over" before you get a return response. Your offer won't be used as leverage by a seller to solicit higher offers from others.  Nor will you have to wait around and pay extra rent waiting for the owner to move out while his new home is being built.  So, if you like simple "cut and dry" precise rules and quick answers you will like buying a HUD home.

To purchase a HUD home you simply complete a short purchase contract, put up a refundable deposit and have your bid (offer) summited.  Easy. 

Since you'll know what 'bid period" the home is in, you'll know exactly when you will get an answer.  It' could be the very next day before lunch time on certain homes. Fast.

Your offers can only be summited through a licensed and HUD participating real estate broker.  This way, HUD knows it's rules and  requirements will be met and buyers get the help they need.  HUD pays the broker a real estate commission so there is no additional cost to you for receiving professional assistance throughout the entire transaction process all the way to closing.  Relax.

In the "private sector", which offer the seller may choose to accept can sometimes involve many variables. Price, terms, closing dates, contingencies, and even how the offer is presented. (your dealing with human emotions and egos)   With Hud there's only One factor that determines who wins the bidding; "Highest Net Contract Amount to HUD".  Simple. 

So... buying a home from HUD can be easier, faster, simpler and involve less mental stress.  Gota love it! 

However, like most things in life there are usually some "trade offs" and buying a HUD home is no exception to the rule.   Please read the next section before you decide if shopping for a HUD home is going to be: 'your cup of tea'.

Is One Of These Homes For You?

Whether a HUD home is for you or not largely depends on what your needs, expectations and financing requirements in a home might be. Only you can determine that, but we can help.

First, you must consider the source.  The previous owners of these homes generally were suffering some financial "stress" in their lives and in many instances (but not all) the homes have also become somewhat "stressed out" themselves.  Many, are crying out for someone to come along and relieve their pain & woes.  This at the least may take some "elbow grease" and generous portions of soap and paint. Others may require someone with a "handyman" nature and still others may require a professional stress relief 'General Contractor'.

We've seen them in all conditions, from "move-in" perfect to... well... shall we say, emergency critical-care condition!   How much you can and are willing to do yourself will become a major factor in considering whether a HUD home is suitable for you. Often these homes can be acquired at a pretty good price and with a little effort and a few fix-up dollars can provide one with considerable "instant" home equity.  (check out our page on "HUD's We've Sold" for some examples)

Secondly, Whether the home is "Insured" or "Un-Insurable" will affect the type of financing you will need for purchase.  HUD insured homes will qualify "as-is" for a new government loan, either FHA or VA.  The un-insurable ones will require all cash or a conventional type home loan, which generally means a much higher downpayment.   Another possibility is a FHA 203(K) type loan which allows you to borrow enough to cover the purchase of the home as-is plus monies (at least $5,000) to make necessary repairs.  This type of loan is quite complicated and beyond the scope of this report, so call us if you'd like to learn more.

Third, being able to properly inspect a home is an issue with the  HUD homes.  HUD encourages you to have a professional home inspection done before you bid. We agree, but there is a bit of a "problem" here that you should know about when considering HUD properties.

All HUD homes are sold on an "as-is" basis. HUD does not make any repairs or warranties, expressed or implied, on the homes. Hud does not guarantee the condition of any house, FHA-insured or not, or whether it meets local codes or zoning requirements.  Buyers must make sure the home is in a condition they are willing to accept. And again... they encourage you to inspect the home thoroughly. But here's the "rub", (per HUD policy) all inspections prior to bid have to be made without the utilities being on.

Only winning bidders may make an inspection with utilities on. Additionally the new "Home Inspection Policy" rules are pretty strict in themselves requiring; 1) a prior request & approval, 2) a certified funds deposit fee to be posted with the REAM, 3) must be done by a professional licensed Inspector and 4) the intent and purpose of the inspection may only be to identify major defects.  IF the inspection discloses a major defect; for Insured sales you can either close as-is or be released from the contract and your earnest money will be refunded (HUD will not make repairs). For Un-Insured sales the inspection results (regardless of outcome) will Not be considered a basis for canceling the sale. (Now in this case they won't force you to proceed, but your earnest money deposit will likely be forfeited).

So...I'm not trying to scare you here, but you should be aware that as far as like the air-cond, appliances and other items are concerned, you have to gamble a little bit.  Be fore-warned.  And remember - all worth while rewards in life come with some degree of risk.

Finally, "Compared to what?" Is a question all potential home buyers should ask.  What else is currently available out in the "private" sector that might be as good or even a better buy? One needs to shop and compare to be able to "recognize" a good buy when you come upon one.   We can help. As members of the local Multiple Listing Service (MLS) we have unlimited access to all information on all homes and can show you EVERY home for sale... beyond just the HUD's....regardless of what name is on the sign.  We can help you find, bid (or negotiate on a private sale), assist in selecting the "right" lender best suited for you and totally walk you through the entire home buying transaction puzzle process till you receive the keys to your new home.

Like HUD, we're here to assist you with the home ownership dream and We have the Knowledge and Experience to make it come true for you!   So Call Us Soon, and discover how we can help you too.