One thing that can totally trip up a HUD transaction is the appraiser calling out a repair. HUD apparently does not make any repairs, and they won't allow you to do it either. They even warned me against plugging in a CO detector! Appraisers calling out repairs is quite common.
I would not recommend any non-cash buyer ever make an offer on a HUD property. Too much risk of too much frustration and even losing your earnest money because your financing may lapse (or lock expire) before they can close.
This really is sad because HUD is just throwing taxpayer dollars down the toilet by having such a horrible process. I've been calling it "unadulterated government."
When they refuse to do any repairs at all, no matter how small the cost, something is terribly wrong. Ordinarily that would be a good thing for buyers, because when that happens HUD might list the house again at a lower price. But in situations where the appraiser calls out a repair, at that point the buyer would typically have almost $1,000 invested into the inspection and appraisal (assuming not an FHA borrower and the FHA appraisal is still good).
I will say Trevor has gone a bit far, being negative on all REO properties. Many REO properties are very good buys, and although they may have problems, that is not the case on every REO. HUD is a special case. No matter how good the property looks, the buyer is not protected from being affected by really poor policies implemented by HUD.
Unless you're a professional investor paying all cash, please accept my friendly advice based on 23 years helping Home Buyers as a Mortgage Banker: Do NOT buy a foreclosed home.
I did many HUD home purchases back in the '90's. These deals were not pretty for my first time buyer clients. Basically, with a foreclosure, you're inheriting someone else's headache. Deferred maintenance; damage from vandals; unanticipated repairs that cost REAL money. No, don't do it.
Get Prequaliifed by an experienced Local Mortgage Banker; find a great, full-time Realtor. Find the house you want from a regular Seller at the price you're willing to pay. It's not complicated, so why make it so?
All the best!
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker â€“ NYS Dept. of Financial Services
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I'd state that differently. Work with an agent who has experience with HUD, and is willing to work with HUD despite that experience. ;-)