I am a first time home buyer and interested in buying a foreclosed/HUD house. Could someone please tell me?

Asked by Kathy, 75070 Sun Aug 23, 2009

how this process works. How is it different from buying from a seller/real estate agency. Also, does the gov/HUD solely screen people based on "the highest bidder"? Do they also look at your credit history. Thanks.

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6
T.E. & Naima…, Agent, Dallas, TX
Tue Aug 25, 2009
The process for HUD Homes is not like normal buyer-seller transactions in that the buyer has his agent place a bid on BidSelect.com. The winning bidder is judged by the net amount to HUD, which is net of any closing costs you ask for and commission. You must be pre-approved by a lender and HUD's preapproval letter has specific requirements that are more stringent than may be acceptable to a normal seller. The lender will look at your credit history before issuing the letter, not HUD. Some banks who are selling their foreclosed properties require you to pre-qualify with them to check your credit, but you can use any bank to get a loan to buy the property.

You may go to BidSelect.com and search for homes yourself. You may NOT bid by yourself. You must have an agent who is registered with HUD (we are). The homes themselves are available for your inspection -- just ask your Realtor to show any homes you're interested in. Do this prior to the bid deadline so you'll know how much you want to bid.

Many HUD Homes need some kind of investment in paint, carpet or other repairs. Most of them are not move-in ready. Some repairs are extensive. Fortunately, many of the HUD Homes do not require extensive repairs, but some do. If the repairs are estimated to be over $5,000 you will need a different type of FHA loan or a loan from a lender that will allow you to complete the repairs after closing. HUD will not allow you to repair things before you actually close, and lenders may not make a loan on a house that cannot be occupied because the repairs are extensive. Yes, FHA has 203(k) and k-streamlines, but you can also get a HomePath Renovation conventional loan.

BidSelect lists the amount of repairs they are estimating and classify the property accordingly. Insurable homes can be moved into after closing, uninsurable homes means that FHA won't lend unless an escrow account is set up to fund repairs after closing (usually you can't move in right away), and insurable with escrow homes have some repairs to do to make the home livable (e.g. A/C is bad).

The highest bidder has a couple of twists for HUD Homes. Homes designated as Good Neighbor Next Door can be purchased by policemen, teachers and the like at 1/2 the listed price. They bid full price but pay half. They count as full-price bidders. Non-profits can also be given preference to buy. So, when you're looking at a listing on their site, make sure it is available for you to buy before you ask your Realtor to show it to you and place a bid.

Your Realtor must be holding an earnest money check when he bids -- $500 for houses priced under $50k, $1000 otherwise. Normally, you get a month to close but you can get extensions fairly easily -- the first extension is usually free. During the time after you win but before you close you can do other inspections, but be warned: you are buying as-is. The inspection may reveal some hidden defect not already on the HUD inspection report. It is possible to bail out if a hidden defect is uncovered or to re-negotiate, but many people considered additional inspections a waste of time and money.

When you first view the property with your Realtor, you should make note of repairs or changes you want to make after closing. If you're not sure of the cost, bring back your contractor before bidding.

Lastly, when you're looking for a good deal -- and most people are -- don't limit yourself to foreclosed properties. Sometimes the move-in ready house around the corner is almost as cheap as HUD's list price. With a little negotiation, you get a better deal than fixing up someone else's leavings. Let your Realtor find you a good deal.
Web Reference:  http://www.SumnerRealty.com
1 vote
RJ Avery, Agent, Forney, TX
Sun Aug 23, 2009
Also after posting I read a couple of the other responses. Firstly theses home are not hard to purchase the actual foreclosed home typically have a fast turn around, they can be very competitive and some will not qualify for FHA without a 203k loan.

If they are not competitive, ie no multiple offers, they are negotiable, the average I would say on most of my foreclosure deals is that they will at least take an offer of full price but agree to pay all the closing costs.

If its a HUD property these are even easier, they are on electronic bid deadlines that are plane as day and the process after is very easy. these properties even have property inspection reports which are normally very accurate, but i still recommend and they give you your own 15 day option period for inspection for free.

I personally purchased a HUD home over a year and a half ago and got a great deal on a great home that needed some paint and other small things.

Once again please dont hesitate to call as I honestly have just wrapped up finding all of my working clients homes and are under contract for each of them and am very eager for a new client. I am a full-time agent, which is one of the most important things to consider when working with a Realtor especially when you will be working with time-sensitive properties.

RJ
Web Reference:  http://www.findapadfast.com
0 votes
RJ Avery, Agent, Forney, TX
Sun Aug 23, 2009
The basic process starts with starting a list of homes you would like to see. If I was your Realtor I would not suggest focusing solely on HUD/Foreclosures even though they can be a good deal for you and for me, agents can make up to 5% on these transactions and this fact effects your bid on the HUD process (ie your net bid).

There are also individual bank foreclosures and short sales. Short Sales I tend to try to stay away from because they are normally more hastle and heartache than they are worth

On the "highest bidder" they will typically take the highest net bid. They calculate the net bid by offer amount - any closing costs asked for - % of commission requested by agent. This is the tricky part you could feasibly put a higher bid in and another bid could put a bit lower bid but because their agent asked for 3% commission and not 5 they would get it.

I have won bids for my clients in this exact way.

On HUDs if you put a full price offer in you can qualify for a $100 down program. However they will only pay 3% closing costs and you essentially need 5 to 6% to close a loan so essentially you will still be bring 2 to 3% to the table. Can be cheaper than typical financing.

The main thing is that a Realtor has to show you these properties and put the bid on one for you. I always suggest working with one Realtor as it is a great way to build a raport and over the house hunting experience develop a relationship that is beneficial to both parties for the long term.

As an added bonus my lack of a large name broker allows me to rebate 20% of my commission back of all of my commissions to you the consumer. I still make the same the only person who is cut out is the large name broker.

Please do not hesitate to call me as I am very familiar with all the Foreclosure purchasing procedures that are out there.

Thanks for your time
RJ Avery
214-682-0598
Web Reference:  http://www.findapadfast.com
0 votes
Carol Luckock, , Collin County, TX
Sun Aug 23, 2009
Hi Kathy, as a first time home buyer you must close on your home by 11/30/09. to qualify for the $8,000 government tax credit. Sometimes lenders will let you use the $8,000 as part of your down payment on your new home.

Foreclosures are almost always "as is" properties. Meaning they may need work done on them prior to moving in. Sometimes it can take a few months for a foreclosure process to go through and you may or may not be in time to take advantage of the tax credit.

Please view our website at http://www.collincountyhomesllc.com. I would like to help you if you are interested. Please call 469-222-0700.

Carol Luckock, Realtor
0 votes
Voices Member, , Benton County, OR
Sun Aug 23, 2009
Kathy

You can find the information here and review it at your leisure....
http://www.hud.gov/buying/index.cfm

You can check out the Hud properties for sale in Texas here and read about the available programs plus the Bid/purchase process
https://www.bidselect.com/servlet/RouterServlet?p_build_page…

Hud properties for sale nation wide and info on the bid/purchase process for different areas or states......
http://www.hud.gov/homes/index.cfm

Good luck, Dunes
0 votes
Jerry Holcomb, , Dallas County, TX
Sun Aug 23, 2009
Hi Kathy:
Great question, Foreclosed/HUD homes are different than buying from the real person that owned the home.
1, The Bank/HUD that owns the home has hundreds in not thousands of homes for sell and that home is just a number to them in a pile of files on their desk. Expect delays in response from them.
2, you have little negoitation before or after the offer is made.
3, Most homes have sat vacant for some time now and repairs you may not see are possible.
4, when dealing with the actal home owner they most likely have another home (only one) they want to buy and need to sell NOW. The Bank does not.

In most cases yes, the highest bidder wins however, special treatment is given to Public safety, Nurses & teachers.

You will have to be pre-approved with a leter from the lender usually sent with the contract. HUD or the Bank does not look at your credit only that you have been pre-approved.

Now, timing is an issue most will give you only a short time to inspect the property before option period is over so you need to move quick to have an inspector really check out the house, foundation, HVAC etc.
Then they will require loan docs 3-8 days in advance so they can sit in the pile of other contracts to review.

Plan on asking for more than 30 days to close the financing to be safe.

So, If I haven't scared you off of Foreclosure/HUD homes let me keep going.

Yes, you can get a deal on a HUD home and we really need people to live in these homes. It helps the neighborhoods out and down the road you will have a beautiful home.

If you have more questions send me a note to jerry@DallasFHAloans.com
0 votes
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