Foreclosures either repossessed by the government or repossessed due to defaulted payments on a loan secured by a government agency (like FHA). Are sold by the government or through lenders at auction.
Simply put, a government-owned property is one that is owned by a department of the government. The corresponding division of the government is the lender so, therefore, they have the authority to foreclose and sell the property when the owner fails to maintain payments on time.
There are a number of reasons that this debt can occur. It could be due to unpaid taxes, or it could be an issue concerning financing, such as an adjustable rate mortgage that has become too expense to maintain. Regardless of who the lender is, all divisions of the government have the same ability to foreclose due to non-payment.
There are several different names for government owned properties. These homes are commonly known as government foreclosures, while other titles you may hear are REO, or real estate owned, and repo homes. However, the phase at which the homes are sold vary. For example, a foreclosure means that the bank has taken the property back, while an REO means that the home did not sell during the foreclosure process and it reverts back to the bank.
There are many different divisions of the federal government that can have property for sale:
HUD, a division of the government known as Housing and Urban Development, is a large provider of government owned properties. In order to qualify as a HUD home it must be a home who mortgage is insured by the FHA, or Federal Housing Authority. These homes are residential and can be a single unit property or it can consist of up to a total of 4 units.
HUD exercises the same option to reclaim that a bank does. When a homeowner with a HUD mortgage becomes delinquent, HUD has the authority to take back the home in order to sell it off so that they may satisfy the debt.
The condition of a HUD home can vary in terms of the level of repairs that it needs. While a few of these homes are in "move-in" condition, a majority of them are in need of some work in order to get them back to livable condition. The only repairs that HUD will make on a home are if it concerns a safety issue. Unfortunately, many home buyers simply do not have the resources to pay for this extensive level of work to be performed. For these individuals, there are programs in place to help out.
The FHA 203K loan is one such program. The main goal of this program is to finance a property's rehabilitation back to a normal condition. The loan can even be used to relocate the property to another foundation, if necessary. Investors will routinely purchase these homes in order to rehabilitate them and either resell them to a home buyer or hold onto them long-term for rental properties. These are often referred to as a "fixer upper" home or a "rehab".
The VA, or Department of Veterans Affairs, is another source for foreclosed homes. This is the federal agency that guarantees mortgages for individuals who have served in the military. When homes with VA-backed loans are foreclosed on, the VA takes back the property in the same manner as banks do.
For those looking to purchase a VA home, there are several programs that might be helpful to obtain financing. Among these are BAC Home Loan Servicing, the VA Vendee Financing program or even a regular VA home loan.
An unlikely source for government-owned homes that is often overlooked is the US Department of Agriculture Rural Development. This division of the USDA is geared towards developing, and redeveloping, rural areas. In order for an individual to secure one of these 100-percent government- insured purchase loans, they have to be utilized for properties located in a rural area. The lenders issuing these loans also have to adhere to very strict federal guidelines.
Properties can be purchased from other entities, as well. Some that are familiar to the public are Fannie Mae and Freddie Mac. Another source is the FDIC, or Federal Deposit Insurance Corporation. This regulator of federal banks absorbs properties when they are either forced to close a bank or if the bank fails. Others that many do not normally associate with having housing inventory is the IRS, U.S. Army Corp of Engineers and the U.S. Marshals Service.
The U.S. Army Corp of Engineers acquires property as a result of a base closure or a realignment action. The properties that are available from the U.S. Marshals Services are ones that are confiscated from criminals who have been arrested while IRS held properties are confiscated due to unpaid back taxes.
Government auctions are a great source for buying foreclosures. However, this can be a very fast-paced method, and therefore may dissuade many individuals from using this route to locate a property.
Buying foreclosures is accomplished in a number of ways, depending on who the lender is. For instance, FDIC foreclosures are often initially negotiated verbally with the details furnished on FDIC contracts once they are agreed upon.
HUD properties are slightly different. Interested buyers go online and place a bid for the property that they are interested in. HUD reviews all submitted bids to see if any are acceptable. If a bid is accepted, they then fill out the applicable paperwork and submit it to HUD. There are very strict time-lines involved in purchasing a HUD home. If a buyer fails to follow these specific guidelines, the property is placed back on the market and bidding is re-opened.
The USDA Rural Development Program, a division of the U.S. Department of Agriculture, is designed to assist buyers in purchasing properties located in rural areas. Homes are purchased through a bidding process similar to HUD.
Purchasing a VA home is similar to bank foreclosures and utilizes a standard purchase and sales agreement. Fannie Mae and Freddie Mac also use a standard purchase and sales agreements. Both processes closely resemble purchasing from a private seller except that the process is generally longer.
Homes held by the IRS and the U.S. Marshals Service are sold by way of a public auction. Homes are advertised for sale with a set auction date. Potential buyers bid on a property with the home going to the highest offer. The IRS uses the proceeds to pay off outstanding tax liens while the U.S. Marshals Service divides the proceeds up between various programs.
There are a number of different reasons why it is a good idea to get involved with Government foreclosure investing, but like any type of foreclosure investing, is just a matter of buying something at a lower price than what you can sell it. The real key to getting started in doing this type of gov investing is to find the site that contains a new database of these listings. If you simply search on one with an old listing, you're not going to have the time that is necessary in order to prepare for auction. You can always rely on foreclosuredeals.com for this, as our database is updated regularly.
Yes, it is possible to buy government foreclosed homes with significant discounts below fair market value or list price. The government routinely repossesses thousands of homes per year for a variety of reasons, including failing to pay the mortgage on a loan backed by a federal agency (such as VA, FHA, USDA, etc.), failing to pay income or property taxes, or having property seized as a result of civil or criminal proceedings. Since the government is not interested in owning a real estate portfolio, it is interested in selling as many of these properties as quickly as possible for a reasonable amount. Therefore, investors and homebuyers routinely purchase homes from the government at significant discounts from the original list value.
Investors or homebuyers interested in buying foreclosures directly from the government must go through the government-sanctioned bidding process operated by HUD. HUD lists its homes online via its HomeStore website. Each home listing is available during a specific timeframe, called the bid period. During the bid period, you can submit written bids via a HUD-approved real estate broker, who communicates your offer to HUD. At the end of the bid period, you will be informed on whether or not you won the bid by HUD. In order to buy foreclosures from the government in this manner, you need to meet certain requirements, such as being an owner-occupant. Investors or those looking for second homes need to wait until the bid period expires and no winning bids are delivered; they will then be allowed to bid on the property.
Real estate agents and brokers do hold government foreclosure listings, which have properties owned by the government because the owners defaulted on loans secured by government agencies. These listings contain properties that can also be found at HUD HomeStore, but a real estate agent is likely more knowledgeable about the property. You can consult with a real estate broker in regards to finding these listings and properties, or can find them online through the government website or a foreclosure listing service. By and large, the information is public domain and should be readily available.
There are multiple types of auctions that you can attend in order to buy government listings, but these in-person auctions mostly involve tax foreclosures and property seized by state and local government. The federal government sells its homes via an online auction of sorts through the HUD HomeStore. Buyers register with HUD and view properties online. These properties are open to bidding during a certain bidding window, and transmission of any written offers (or bids) must take place via a registered and certified HUD real estate agent (a private broker or agent who has registered with the agency). For these homes, you do not have to attend any auction in person.
Yes, there are government-funded programs to help senior citizens make needed repairs to their homes on various levels of government. The most utilized program is the HOME Investment Partnerships Program, funded and operated by the Department of Housing and Urban Development and administered through state and local government. It is a block grant to state and local government that helps lower-income citizens aged 62 and up make necessary home improvements to their properties and ensure that they meet local housing codes. These improvements can be used for a wide variety of repairs, including making a home accessible to the handicapped or modernizing plumbing, wiring, and structural components. Approximately $2 billion each year is granted to states and local communities for this purpose.
State and local governments typically have additional programs that vary according to the area, ranging from grants to low to no-interest loans for repair purposes.
You can obtain lists of government foreclosures from foreclosure listings services as well as the official webpage of the Department of Housing and Urban Development, located at the HUD HomeStore. This website lists single-family and multi-family properties for sale from several government agencies, including the Federal Housing Administration, VA, FDIC, IRS, U.S. Army Corps of Engineers, Customs, U.S. Marshals Service, USDA, and General Services Administration. Local real estate agents and brokers registered with HUD may also have listings available. All official listings from government agencies of foreclosures they own are directed through the HUD HomeStore. State and local governments may also supply lists of foreclosures in their jurisdictions, and this information – if available – can be found through the state's department of housing.