Is a HUD Home Right For You?
Posted on: 26 November 2019
The Department of Housing and Urban Development (HUD) offers several programs and opportunities for those who want to own their own homes. One program allows foreclosed homes with previous Federal Housing Administration (FHA) loans to be sold at very affordable prices. These homes present an obvious bargain, so buyers will need to take some extra steps beyond what is normally expected to make this work. Read on to find out more about buying a HUD home.
How the HUD Process Works
HUD homes are not purchased by buyers making a deal with a seller. Since the seller is the federal government, homes are listed for sale on the HUD website, then buyers must work with special real estate agents to buy the homes. Homes are not so much sold as they are auctioned off — though it's through sealed bids submitted by your real estate agent. There is a set period when bids can be submitted and the home is sold to the highest bidder during that period. If your bid wins, you have a certain period of time to settle (or close) the deal.
Along with your bid, you'll need to provide an earnest money deposit. If you are not the highest bidder, that money is refunded. If you win the bid, it goes toward the down payment or closing costs. A word of warning, though: if you fail to secure financing or change your mind about buying the home, you may lose your earnest money deposit.
Finding a HUD Home
Each state maintains a website with HUD home listings. Once you've located some property, you can gain more information by contacting a real estate agent approved by HUD. Since HUD pays the agent's commission and since the sales process is so different, only certain agents work with HUD homes. Along with home listings on the website, you might also find lists of approved real estate agents. Unlike homes that are often auctioned by lenders, you can tour HUD homes by making arrangements with an agent.
HUD Homes Often Need Work
Like any other foreclosure, HUD homes are seldom move-in ready. Before you bid on the home, hire a professional home inspector to tour the property and assess the issues. When extensive repairs are needed, you can adjust your bid accordingly.
Paying for the Home
The HUD just sells homes—they don't provide financing. Unless you have enough cash to close the deal, it's advisable to attain lending before you make an offer. Since HUD homes often need work, the prices reflect that consideration. You may need to pay for a professional appraisal before a lender will work with you on a HUD property.
To find a HUD real estate agent to help you through this process and snag a great deal, consult the HUD website or talk to local home buyer services for guidance.
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