Central Ohio: Why do HUD Homes Fall Out of Contract and get Re-Listed?

Why HUD Homes Fall Out Of Contract

Did you ever wonder how many HUD contracts never close?
Do you know why HUD homes fall out of contract?

These are two common questions many of my customers ask. I did a little bit of research, compiled some numbers and found an explanation for you.

Let's first look at new HUD listings - that's the new listings we present every Friday on our HUD homes map in red. Last year (2009) HUD listed a total of 1,049 homes in Central Ohio - approximately 20 new HUD homes per week. These homes were never listed as HUD homes before. They represent the total inventory of HUD houses in the Columbus area.

Over the same time period 910 HUD homes got relisted.That comes to around 18 per week. This number includes homes that were relisted 2 or 3 times. Basically, this means that for 90% of all homes HUD has to either lower the price or put them back on the market before a home gets sold.

There are the 3 reasons why HUD contracts fail:

1. Missed Deadline: If a HUD home is out of contract 2 or 3 days after the offer was accepted, it usually indicates that the paper work was not submitted at all or not submitted correctly within the 48 hour deadline. Either the buyer did not sign the contract and deposit an earnest money check with the brokerage, or the real estate agent did not submit the contract in the allotted time period.
   Tip: Your agent needs to overnight the contract within 24 hours of contract acceptance and all documents must be signed in blue ink.
   
2. Property Condition:When a HUD home is relisted 2 to 3 weeks after the offer was accepted, it indicates that the buyer completed a home inspection and was not satisfied with the result. The home inspector may have detected problems that were not disclosed in HUD's property condition report or the appraisal.
   Tip: If this happens, HUD will often relist the property as uninsured and accept lower offers.
   
3. No Financing: If a HUD home falls out of contract after 4 to 8 weeks, most likely the buyers did not get their financing approved. There could be different reasons for this: maybe the underwriter required certain repairs before final approval or the borrower could not provide all documentation requested by the lender. Lenders are very picky these days and sometimes minor damage to the house may result in a loan denial.
   Tip: Only work with lenders that are experienced with closing HUD properties. Call me for a list!

How do you avoid these problems? Work with me. I am closing on several HUD homes every month. I will help you anticipate potential problems, resolve them for you, or help avoid them altogether. 

If I notice that a property fell out of contract, I will let you know immediately, because it gives you an opportunity to get an even bigger discount once it gets relisted.

Thanks for reading our Columbus HUD Homes Blog
Posted by: Susanne Novak, ABR, FIS, GRI 
Columbus Realtors specializing in
HUD Homes, Shortsales, Investment Real Estate
(614) 975-9650   http://ColumbusOhioHUDHomes.com