HUD homes can be tremendous bargains. If your real estate agent seems to discourage you from trying to buy a HUD home, maybe it's because they are unfamiliar (and therefore uncomfortable) with HUD's policies and procedures. Also, you should be aware that many real estate brokerages are not HUD-registered, which means their agents cannot submit a bid for you on a HUD home. If HUD homes are off limits to your agent, then it's not surprising that buying a HUD home would be discouraged.

HUD contracts with local real estate brokers to list their homes. These listing brokers sell the majority of HUD homes, they are very familiar HUD's policies and procedures, they understand the bidding process on HUD homes, and they do not discourage clients from buying a HUD home. If you'd like to find listing brokers for HUD homes, or find other HUD-registered brokers, please contact me for free assistance.

HUD homes result from foreclosures on properties that had FHA-insured mortgages. The foreclosing lender turns the property over to HUD, which takes title and then re-sells the property to the general public. These properties are known as "HUD Repos" or "HUD Homes" (not "bank-owned" or "bank REO" properties). For the first 10 days a HUD home is offered for sale, bids are accepted only from buyers who would be owner-occupants (that is, buyers who would actually live in the home as their primary residence). After that, if no acceptable bid was received, then the bidding is opened up to everyone.

HUD homes are appraised and inspected before they are listed for sale. The inspection report is available to anyone who's interested. The appraisal is an FHA appraisal, and any FHA-required repairs are identified for you right up front. Both the as-is market value and the estimated cost of any necessary repairs are available from the moment you see the offering price (which is generally lower than the appraised value). This is a distinguishing feature of HUD homes, as opposed to bank-owned properties.

HUD homes can be purchased with cash or any type of financing, whether conventional or government. But these properties are ideally suited for FHA financing for owner-occupant buyers (FHA purchase mortgages are available strictly for primary residences). Bear in mind that HUD 'owns' FHA, and part of their mission is to promote homeownership. That is why bidding on HUD homes is restricted for the first 10 days and investors are excluded. That's why HUD homes are listed with an FHA appraisal having already been performed. That's why the property details for HUD homes indicate right up front whether the property is eligible for regular FHA financing, or would need an FHA loan with a repair escrow, or would need an FHA rehab loan. There's no guesswork or uncertainty involved. They've made it as easy as possible - light years better than trying to buy a bank-owned property or a short sale.

They've even created a special financing program to help make it more affordable than ever for people to buy these HUD homes. What is the # 1 obstacle to homeownership? The down payment. For regular FHA loans, the minimum a buyer must put into the deal is about 3%. That's far less than the 20% standard down payment with conventional financing that many in the public unfortunately believe is required. But still, 3% can be difficult. Buying a HUD home can make that obstacle disappear. If you buy a HUD home that you'll move into as your new primary residence, there's a special HUD/FHA program that waives the normal borrower contribution requirements and only requires a $100 down (yes, just a hundred bucks). The loan amount can be higher than the purchase price to help cover closing costs and necessary repairs. Any FHA-required repairs up to $5,000 can be escrowed into the loan and completed after closing. (Regular FHA loans do not allow required repairs to be completed after closing.) If the required repairs are greater than $5,000, the $100 down program would not be appropriate, but FHA rehab loans are available that allow you to buy a home and make repairs and renovations that cost much more than $5,000, all in a single, safe, fixed-rate government loan that closes at the time of purchase.

We offer these special government loan programs and many other home financing solutions. Please feel free to contact me for more information: James Wheeler, 813-600-3428.

Hi Mary: I am an Allentown area realtor who has experience with HUD properties. although each seems to vary, the similarities are these.
Usually a foreclosure situation, they are typically in AS IS condition. There is alot of extra paperwork to fill out. Usually the property goes on sale for a lower than market value amount. You are given a certain time limit to place your offer. They take the highest bidder. It is a sweepstakes. You buy the property as you see it. You will never expect the seller to make any repairs, even if you elect to have a home inspection.
You of course have the ability to make any offer you like. You need though, an experienced Realtor, like me, who has done this before, who is willing to go the extra mile to make it work for you.

Many Realtors, who perhaps are not as "hungry" do not want to go through all the work to fill out the extra paperwork, only to be turned down, because someone else beat your offer.
I would be happy to work with you in this situation. Please call me to talk about this further.
Don Bradbury 215-536-6777 x 329 http://www.bradburyteam.com

Mary,
Sounds like you already have a couple of good answers. One other caution that I would offer is to consider the full spectrum of houses that are available to purchase.
HUD and foreclosure homes have been getting a lot of press and more than appropriate attention recently from folks looking to finally be able to afford a house in this market. Many times these properties are not the best value out there! Know that they usually are sold 'AS IS!' & may be REAL fixer-uppers. If you are a not an experienced remodeler these might be a bad choice in the long run. Travel carefully and secure some good expert help from someone who is working FOR YOU, not just with you.
Blessings as you make your decisions.

I've dealt with a lot of HUD properties recently. Due to the bidding process they use to sell these properties, a property that is in reasonably good condition will more than likely receive a few bids. Some may even bid higher than the list price in order to secure the purchase. I'd say follow the advice of your agent, especially if you really want the property. If you have doubts about the property, bid what you feel comfortable with.
I don't discourage clients from purchasing them as long as they know the risks involved. Make sure you review the contract package carefully and ask your agent how the terms may affect the type of financing you are pursuing (due to the condition of some of these properties, FHA financing may not be an option). You may also want to review the risks to your earnest money should you want to back out of the contract due to the results of any inspections you have done. HUD can sometimes make it difficult to do this.

Hello Mary,

You have a right to offer whatever you want, regardless of what one of us Realtors tell you. What you need to understand is that the seller, whoever it is in this case, can simply refuse the offer, especially if you throw a really excessive lowball one. Then again, you just never know the intentions of the seller and counter offers can occur. As a Realtor I would only advise an offer based upon my personal research on the "said" property. If you are not working with a Realtor, especially if you have no experience purchasing a HUD home, I highly recommend finding one with experience in that area.

As for why a Realtor may discourage a HUD purchase, it all depends on who you deal with. I've run into Realtors in the past who actually specialize in HUD properties, and are darn good at it. Keep in mind these properties usually have some sort of "history". Foreclosure, damage, tons of work, etc.

HUD homes are sold to the public when HUD/FHA mortgages are foreclosed. HUD pays the original lender the amount of the loan due and other expenses. HUD then resells the property.

Again, a lot of times these properties need major attention. Not always, but usually there's something that may turn away most buyers. While I've never dealt with a HUD purchase, I would assume a lot of Realtors simply don't want the headache of dealing with a home that may have numerous issues that need to be dealt with.