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Purchasing a HUD Home
There are many
people active in purchasing HUD homes. Before you buy one, make sure you
are well-versed in purchasing HUD homes.
I highly recommend visiting the HUD website at
www.hud.gov.
Spend some time going through it, however to
help you along, here are the most frequently asked HUD questions, taken from
their website.
Question 1: What is a "HUD Home"?
Answer: When
someone with a HUD insured mortgage can't meet the payments, the lender
forecloses on the home; HUD pays the lender what is owed; and HUD takes
ownership of the home. Then we sell it at market value as quickly as
possible.
Question 2: Who can buy a HUD home?
Answer: Anyone!
If you have the cash or can qualify for a mortgage, you can buy a HUD home.
Question 3: Are HUD
Homes meant for people with low incomes?
Answer: HUD
homes range in price, but most are affordable for low- and moderate-income
Americans.
Question 4: Is it true I can get a HUD Home for a dollar?
Answer: No.
HUD sells homes at market value - that means that the price is set based on
the price of similar homes sold in the area.
Question 5: If the HUD Home needs repairs, will HUD make them?
Answer: HUD
Homes are sold "as-is," without warranty. That means that HUD will not pay
to correct any problems. But even if a HUD Home needs fixing up - and not
all of them do - it can be a real bargain! For example, HUD's asking price
on the home will reflect the fact that the buyer will have to invest money
to make improvements. HUD might offer special incentives such as an
allowance to upgrade the property, a moving expense allowance, or a bonus
for closing the sale early. And keep in mind that on most sales, the buyer
can request HUD to pay all or a portion of the financing and closing costs.
Your real estate agent (Marilyn Lukas) will have details. We encourage you
to get the home professionally inspected before you make an offer so you
will know what repairs you may have to make BEFORE you submit your bid.
Question 6: How do I buy a HUD home?
Answer: Start by finding a participating real estate agent. Your
real estate agent (Marilyn Lukas) must submit your bid for you. Normally,
HUD Homes are sold in an "Offer Period." At the end of the Offer Period, all
offers are opened and, basically, the highest reasonable bid is accepted. If
the home isn't sold in the initial Offer Period, you can submit a bid until
the home is sold. Bids can be submitted any day of the week, including
weekends and holidays. They will be opened the next business day. If your
bid is acceptable to HUD, your real estate agent will be notified, usually
within 48 hours.
Question 7: If my bid is accepted, then what happens?
Answer: Your real estate agent (Marilyn Lukas) will
help you through the paperwork process. You'll be given a settlement date,
normally within 30-60 days, by which you need to arrange financing and close
the sale, or forfeit your earnest money deposit, or pay for an extension of
your sales contract. We have an excellent booklet to help you understand the
settlement process: "Buying Your Home - Settlement Costs and Helpful
Information".
http://www.hud.gov/offices/hsg/sfh/res/sfhrestc.cfm
Question 8: How can I find out what HUD Homes are for sale?
Answer: Right
here by visiting http://www.hud.gov/offices/hsg/sfh/reo/homes.cfm.
We update our lists of HUD Homes for sale every day. If you see one that
interests you, contact one of the real estate agents in your area who shows
HUD homes. (Las Vegas: Marilyn Lukas 702.278.4200).
Question 9: How can I get a loan to buy a HUD Home?
Answer: HUD
doesn't make loans directly. Consult with a mortgage professional.
Question 10: Can I buy a HUD Home as an investment?
Answer: Most
HUD Homes are initially offered on a priority basis to owner occupant
purchasers (people who are buying the home as their primary residence).
Following the priority period, unsold properties are then available to all
buyers, including investors.
Question 11: Is there anything else I should know about HUD Homes?
Answer: We
encourage every homebuyer and homeowner to be a wise consumer, so be sure to
read our consumer information. Houses built before 1978 may have lead-based
paint, which can cause harm to your family; so be sure to read about this
hazard and about what you would need to do to correct it. Teachers and law
enforcement officers qualify for 50% discounts in certain situations.
Make sure you are ready to put 10% down plus closing costs (unless you have
720+ FICO scores in which case you may qualify at 5% down) and you
understand that most lenders will NOT be able to close this loan unless the
house is in "livable" condition. Generally what this means is as follows
(and there can be more requirements depending on the lender):
AC/Heating needs to be working.
Water
heater must work.
No broken
windows.
All entries to
home must be made secure.
Electrical
outlets must all be covered.
Floor
coverings cannot be peeling or ripped. They can be dirty.
Oven/stove must
work.
Now, in a lot of these type purchases, you will find some of the above is
broken or missing. You must be willing to make these minor repairs before
getting the loan if the appraiser demands it, which is often the case. HUD
will not pay for these but they may make some closing costs concessions as
stated in #5. (If you are buying a fixer-upper from a regular seller, you
would obviously ask him to make the repairs first.)
HUD strongly
recommends that you do not buy this home until you have had a home inspector
check it out.
For further information on purchasing HUD homes, visit
www.hud.gov.
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