Hud homes in foreclosure: Savings on Real Estate
You've heard about all the advantages of buying HUD homes in foreclosure. You know that they represent incredible real estate opportunities because they often sell at a fraction of what they're really worth in the market. And you know that they come in all shapes, sizes, and conditions in neighborhoods all over the country. But do you really know what a HUD foreclosure is? And do you know what potential dangers await the homebuyer who fails to conduct a thorough inspection?
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What is a HUD Home?
A HUD home is a residential property that is owned by the United States Department of Housing and Urban Development (HUD). HUD acquires the home when an individual or family defaults on a mortgage that was insured by the Federal Housing Administration (FHA). During HUD homes' foreclosure, ownership transfers to HUD, and the agency then tries to sell the homes as quickly as possible to recover its losses.
How do I get started?
Almost anyone can buy a HUD property. You simply need to have enough cash or be able to qualify for an adequate loan in order to place a bid. The homes are initially offered to buyers who will live in the home for at least one year, but if such buyers cannot be found, the purchasing opportunities are opened up to all buyers, including those who are buying solely for investment purposes. In certain areas, the price of the home is reduced for nonprofit organizations, local government agencies, firefighters, teachers, and police officers.
How are HUD homes sold?
The homes are sole through a bidding process. Anyone can place a bid by working with a HUD-approved real estate agent, provided that you submit a deposit with your bid. The houses sell quickly and settlement often occurs within a month or two of the bid, so it is a good idea to secure financing even before placing a bid. As with any other home, you can arrange for a mortgage through a traditional financial lending institution, or you may be eligible for an FHA-insured mortgage.
Determining the Value of HUD Homes
Probably the most important point to remember when purchasing HUD foreclosures is that the homes have no warranty and are sold "as is". Therefore it is critical to conduct a thorough inspection of the home before placing a bid. What should you look for? At a minimum, hire a professional assessor/inspector and request that he or she examine all of the following:
- Consider the neighborhood. The neighborhood has a significant effect on the value of a home. Be sure to buy in a desirable or at least up-and-coming neighborhood where there is little crime. Otherwise, it will be more difficult to sell the home in the future.
- Approach old homes with caution. Older homes were built under different laws and regulations. Consequently, they may have asbestos, lead paint, or similar hazards. Modernizing these homes can be extremely expensive. Be sure to investigate the costs before deciding to buy.
- Check the heating, electrical, and plumbing systems. Systemic problems with these systems often goes unnoticed by most people, so be sure to hire an expert. Look for water stains, burning smells, frayed wires, uninsulated pipes, and similar problems. Ask about the previous owners' utility bills to find out how well the house is insulated.
- Watch out for structural problems. If the home has rotten beams and posts, uneven walls and floors, cracks in the foundation or walls, or a curved-in roof, get an accurate assessment of how much it will cost to fix before deciding that you're ready to purchase the home as a fixer-upper.
- Make sure the home isn't already inhabited. Look for droppings, insect holes in wooden beams, and mouse holes near the floorboards. You don't want to move in only to find out that you're living with rampant insect infestations or rodent pests. If you find indications of pests, be sure to call an exterminator for an estimate.
Getting the Help you Need
Yes, there are a lot of things to keep in mind when buying HUD homes in foreclosure, but the helpful experts at ForclosureDeals.com are available 24/7 to provide this type of advice when we need it. Furthermore, we're specialists in compiling lists of more than half a million foreclosed properties nationwide, letting you know about them as soon as they hit the market. Sign up today for your seven-day trial membership and findout what we can do for you!
