This is a really exciting time to be in real estate contrary to what you might hear or read in the media. Interest rates are low, home prices affordable and the government is offering an $8,000 tax to qualified first time homebuyers. When will you find a better time to purchase a home? One of the most attractive programs is the HUD $100 down program. A HUD home is simply a home where the previous owner had an FHA loan. The condition of the home depends on the people who lived in it; nothing more or less. I have seen ‘move in ready’ HUD homes and others that need extensive repair. The purchase of a HUD home can be a really good deal but here are some things you need to consider:
- The place to start your search for a HUD home is on their website www.hudpemco.com. On this website you can search by area, price, etc. Once you find a home that you are interested in, HUD provides a Property Condition Report right there on the site. HUD sends out their inspectors who go through the home documenting its’ condition. There is also a list of items that need repair along with the cost to repair these items listed next to the picture of the home. Many of the repairs are cosmetic such as carpet, paint, light fixtures, etc.
- Once you compile your list of homes to see, you must contact a Realtor to show them to you. HUD will not accept bids on property from the general public only from Realtors. Make sure that the Realtor you select is familiar with the HUD bid process and is authorized to submit bids to HUD.
- With your list of homes in hand along with the corresponding Property Condition Reports, go take a look at the properties. Evaluate the list of repairs and make sure that everything is listed on the report. Sometimes additional damage happens after the inspector leaves that HUD is not aware of.
- Once you select the HUD home that you like, the clock is ticking. HUD has an open bid process meaning that they accept all on-line bids until a certain cut off time usually a Sunday at midnight. After that time, no more bids will be accepted on that property. If they accept an offer, then the process is closed on this home; otherwise they will reopen the bid period.
- Prior to submitting the offer, you will meet with the Realtor sign all necessary documents and have your earnest money. The earnest money is either $500 or $1,000 depending on the price of the home. It usually $500 for homes under $50k. Your bid can be submitted at this time. You are allowed to bid over the asking price but you are responsible to bring the $ difference to closing.
- When the bid is closed, HUD officials usually review all offers and the select the one that nets them the highest dollar amount. It is not personal, just business. Your agent will be notified the next day of the winning bid. The agent can also go on-line and see how many bids there were and the amounts.
- If you are the winning bid, there are additional documents to sign within 24 hours and an inspection to schedule. The cost of the inspection can range from $250-500 depending on the size and complexity of the job. Your agent will be notified by HUD of when the utilities can be turned on and you will be responsible for the cost of doing so.
- The final steps after the inspection are financing ones and your lender will walk you through this process.
Buying a HUD home has been made fairly straight forward and easy by the government and is a very successful program. If you are in the market for a home, go to their website, check out their listings, call a Realtor and get in the game! If you don’t have a Realtor, e-mail me – I would be happy to help you.