Hud Repos: The Inside Scoop
HUD Repos are 1 to 4 unit residential properties, which are acquired by HUD as part of the foreclosure, due to non-payment on an FHA-insured mortgage. You can buy a HUD repos only if you have enough money or if you are able to qualify for the loan, which is subject to certain restrictions.
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Rises in HUD Foreclosures
In the recent past, it has been seen that there has been a meteoritic rise in the number of HUD foreclosure homes. Once a homeowner defaults on a Federal Housing Administration (FHA) mortgage, then HUD takes repossession of these homes, to be auctioned later. The loan issued by the FHA is a government-sponsored loan, which has been created to promote home ownership for the low-income group and the working class. If you default on this loan then the lenders will foreclose your home. The agency then will pay off the lenders and take possession of your home.
Homes in Default
Laurie Maggiano, the head of HUD's single-family home sales program says that most of the loans go into default because these sub-prime loans are targeted at low-income borrowers and people with impaired credit. The mission of HUD is two fold. The first fold cites that they need to get maximum return on investment to replenish the mortgage-lending fund. Secondly, the programs targets at improving communities. Hence, when these homes are taken over by HUD, they never sell it off immediately. Non-profit organizations have the first go at HUD repossessed homes, at almost 50% discount. The non-profit organizations in turn rehabilitate and then put up these HUD homes for sale.
What Happens to Foreclosed HUD Homes?
The HUD repossessed homes, which have not been picked up by the non-profit organizations are then sold to teachers and police officers at a 10% discount. A new effort initiated by HUD is that of offering these properties to victims of Hurricane Katrina who have lost their homes. The discount offered is again 10%. A time period of five days is given to police officers, teachers, and the victims of the hurricane. If no one approaches to buy the HUD foreclosure homes then these properties are sold via public auctions.
HUD Foreclosed Homes Sold
Once the HUD repos are opened to public, you can also invest in them. If you are in a stronger housing market, then in order to win the bid, you might have to offer more than the appraised value. Similarly, if you are in a depressed market then to win the bid, your offer can be less than the appraised value. According to one of her reports, HUD sold 57,930 homes in 2006, averaging a selling price of around $79,000. This is what makes HUD the largest sellers of single-family real estate.
A Growing Inventory of Properties
According to another report, there are around 28,000 HUD homes for sale. A comprehensive HUD foreclosure listing is drawn based on the homes listed from every state. According to HUD, the entire Midwest and south are hot markets for HUD repos. Some of the states include Illinois, Texas, North Carolina, and Michigan.
