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HUD Properties
HUD Properties
It is a dramatically different experience from a traditional real estate exchange, but buying a home from the U.S. Department of Housing and Urban Development (HUD) can be an exciting—and lucrative—experience.What kinds of properties are sold through HUD?
A HUD property usually has a Federal Housing Administration (FHA) mortgage that has been foreclosed.
To distinguish the varied conditions of their homes, HUD sorts properties into four categories:
- Properties listed as "insured" meet the FHA minimum requirements in their present condition, and are eligible for FHA financing.
- A home deemed "insured with escrow" requires no more than $5000 of repairs before meeting FHA's minimum requirements.
- Homes that are "insurable with conditions" require checks and certifications from the buyer and property lender before they are eligible for FHA insurance.
- A home determined to be "uninsured" does not qualify for financing through FHA, and needs more than $5000 in repairs to become habitable.
One important thing to remember is that HUD homes are sold as is. There is no seller disclosure, and no liability for HUD after the closing.
The condition of HUD homes can vary greatly. HUD will sometimes refurbish properties with paint, carpet and window or door replacement to make them more saleable—and sometimes they won't. At minimum, all properties will be winterized and secured with a HUD-installed lock.
HUD buyers can help protect themselves by performing a thorough inspection of the property. Although HUD homes have had an initial inspection and appraisal, discovering what defects exist is solely up to the buyer, and at the buyer's expense.
How is the HUD home-buying process different?
Most HUD properties are sold by electronic bidding through a HUD-registered broker. Not all real estate brokers are registered with HUD, and not all are familiar with the bidding process. To list homes and market them to consumers, HUD uses an online agent, GoldenFeather.com. The Web site posts bid results daily, so home seekers can monitor the process.
According to GoldenFeather.com, a bid award is not a contract—it is only an indication that the bidder will have the opportunity to submit a contract for the property.
HUD makes no counter offers. The bid with the highest bottom line is the one that is accepted.
Special buying programs for teachers and police officers
A special program for police officers and teachers allows them to purchase certain HUD properties for 50 percent off the exact listed price, with no earnest money and only $100 down. To be eligible, teachers must teach grades K-12, and must be employed in the school district that the home they are purchasing is located in.
Officers must be full-time, sworn law enforcement working for a city, county, state or Federal agency. They cannot own any other home at the time of closing, and the officer must agree to live in the home for at least three years. In both cases, the homes must be located in an area designated as a revitalization zone—usually an economically distressed neighborhood.
