In the Greater Grand Rapids Area we are in a very depressed area with one of the highest foreclosure rates in the country. For us, it's mostly because of manufacturing job loss rather than due to exotic loans. Regardless, there are a lot of HUD REO properties. But we also have a lot of FHA borrowers. Recently, we've seen a trend changing where HUD has priced the homes so aggressively low that it's caused a competition situation where people are over-bidding. One might think this is a good sign that the market is changing. Perhaps, but in the short-term, what is happening is this is causing a problem where FHA buyers can't typically buy the HUD homes. This is because FHA requires we use the existing appraisal from HUD when buying HUD homes. This existing appraisal is good for six months. Then HUD usually orders another one. HUD usually appraises the home right around the selling price. If someone overbids and wants to use FHA financing, HUD requires the borrower to pay the difference between the overbid price and the appraised value. Most FHA buyers aren't sitting on that kind of cash. So, the deal goes south. It creates a situation where Conventional buyers and Cash buyers are the ones usually being able to purchase HUD homes. It's a little ironic as HUD states that they try to sell first to owner occupants.

When someone is overbidding on a HUD home, we try to explore and exhaust Conventional options as much as possible. This is often not realistic for the buyer due to a lack of assets. In this case, the MSHDA 80/20 Acquisition Rehab. loan might be a great way for a first time buyer to buy with little down and still go Conventional. See my previous blog at: http://activerain.com/blogsview/1266825/new-80-20-conventional-purchase-loan-including-costs-of-repairs-

To learn more, feel free to give me a call at (616) 719-4513.