A U.S. Department of Housing and Urban Development (HUD) home is a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on a Federal Housing Administration (FHA)-insured mortgage. Regardless of whether the property is being financed with an FHA insured mortgage, HUD does not guarantee or warrant that the property is free of visible or hidden defects, termite damage, lead based paint, or any other condition that may render the property uninhabitable or otherwise un-useable. If you have the cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home.
HUD does not warrant the condition of its properties and will not pay for the correction of defects or repairs. In the early ’90s, we bought a HUD and at that time, the bid with the highest NET to HUD was THE winner. In fact, in the case of HUD homes, there are cases in which 50 percent discounts are built-in. For my investments, I’ve bought homes for anywhere between 60% and 87% of the list price.
HUD will get the title company registered with HUD, once a bid is accepted and a title company chosen. The old FHA programs and the newer HUD programs act as an insurance agency for banks, savings and loans and mortgage bankers who make real estate loans to buyers and investors. In my county, an accurate tax assessment is typically 30% lower than the low end of the price in a conventional sale (not a foreclosure or short sale). HUD will pay a 6 percent sales commission to agents involved in the sale, whether sold through a broker or sold by HUD directly. I’ve been looking at the HUD offerings and was wondering how all of that worked.
The electronic bids are stored in the computer system and, at the appropriate time, calculations are automatically performed to determine the apparent highest net offer to HUD. If you are interested in learning more about the HUD home purchase process give Cindy Jones and CJ Realty Group a call to discuss the HUD home buying process in more detail. After your contract has been received correctly, it will be signed by the Asset Manager on behalf of HUD and returned to your agent along with a contract acceptance letter.
While paying in cash is not required, having your financing arranged without HUD is. HUD will not be required to arrange or carry financing themselves. HUD will pay up to 3% of the purchase price in closing costs that are considered to be reasonable and customary in the jurisdiction where the property is located HUD does not pay any closing costs or commissions on Good Neighbor Next Door (GNND) properties.