The majority of the leads that I generate are First-Time Homebuyers, which I love. I enjoy the freshness, the inquisitiveness of home buyers seeking to purchase their first home. When consulting with potential buyers, I always let them know what type of properties are available on the market and the differences between: Short Sales, REO, Flip Properties, New Homes, HUD Homes, etc... As a Buyers Agent, I understand the trials and tribulations of searching, showing, submitting, and closing transactions for all of these types of homes. The challenges that I have had with FHA clients when submitting offers for Bank REO properties is that CASH is KING and Conventional offers are more attractive when it comes down to the bottom line. This is key when it comes down to negotiating multi-offers for FHA participants because they often give up more than they have bargain for. 
As a result, I became an advocate for FHA clients to consider Short Sale properties over Bank REOs. After all, they tend to be in better condition and less competitive, which means the terms that the homebuyer is asking for tend to be more accepted. The problem with Short Sales is the timeframe and uncertainty of whether the offer is attractive enough to the lender/investor to accept. With Short Sales, I like to know the listing agent or at least know that they specialize in them so I can trust that they have the ability to close these types of transactions.
Now, flip properties are extremely attractive to FHA participants because of the condition that they appear to be in. I’ve learned that it is best to be familiar with the company or investor that is flipping these properties because quality of the renovation can be an issue. Appraisals can also be a barrier with these transactions because flippers tend to think their property is worth more than the appraisers do...I understand because they have put the money and the time into improving the property. However, I am all too familiar with the process of challenging an appraisal reports, this takes time from the transaction and often ends up the same way it began. This very situation just occurred with a client I currently have, luckily we were able to re-negotiate the terms to continue with the transaction.
So, why do I believe that FHA Financing and Purchasing HUD Homes is a marriage made in heaven? The proof is in the process...HUD has implemented guidelines that are beneficial to First-Time HomeBuyers that utilize FHA Financing. First, let me point out that FHA Financing has become more attractive due to the increased loan limits, 203(K) Rehabilitating Financing, and Energy Efficiency Mortgage. Oh, I forgot the low down-payment required.
HUD utilizes an electronic bid process, which is one of the more fair process in choosing an offer that is out there. The beauty in this bid process is that it allows me to be efficient and quick in submitting an offer. I can literally submit the offer at the property with the client without any paperwork. It is important to note that buyers have to use a selling agent that is registered and has a NAID#. Once the offer is submitted a bid acknowledgement is given and can be emailed to your client.
BID TIMELINE: Some properties are eligible for the “Lottery Round.” The Lottery Round time period is set to the side for the first seven (7) days for HUD programs (Good Neighbor Next Door Program and non-profit organizations). If an acceptable offer is not awarded within that time period and the property is Insurable or Insurable with Escrow, then the property goes onto the general list and priority is exclusively given to owner occupants for the first thirty (30) days that the property is listed. This process was implemented to maximize the promotion of homeownership. Its important to note that the first ten (10) days that the property is listed is a sealed bidding periond...meaning bids can be submitted in the system and reviewed. On the 11th day, if an acceptable owner occupant offer was submitted, the Asset Manager accepts the bid and begins the process of moving forward under contract with that buyer.
HUD performs an inspection on the home before it is listed. Once the inspection is completed a Property Condition Report (PCR) is given and available to the public to download. This PCR outlines the condition of the property which includes: the properties’ structure, exterior, roofing, plumbing, electrical, HVAC, interior, and appliances. Although, this report help educate the homebuyer on the condition of the property it is not a substitute for a Home Inspection and I would always advise a homebuyer to invest in their own home inspection (purchasers are given 15 days for inspection and are responsible to activate the utilities). Being that these properties are sold As-Is (no repairs or warranties), it is an important factor to take into consideration before placing a bid.
An extra benefit that HUD provides is a Termite Report and will pay for the treatment of active infestation and repairs in the event there is infestation and damage.
HUD also performs an appraisal before it is listed. This is a HUGE benefit to FHA homebuyers because it saves homebuyers time, money and the anxiety of knowing if the home is worth the offer price, which ultimately would have an effect on financing for FHA recipients.
BUYER INCENTIVE: HUD will pay up to 3% for the closing costs! It is important to note that in the bidding process another homebuyer can win the bid if they have a higher net profit.
One of my goals is to help develop communities by matching homebuyers that will occupy the resident and ultimately help that neighborhood grow. I would be naive to say that HUD Homes are the perfect transaction for any buyer but I believe that it is one of that it is a good match for any FHA recipient. Working with a selling agent and lender that is familiar with the process is key to having a smooth transaction. The information given is the beginning process to purchasing a HUD Home, subscribe to my blog to receive further education on Successfully Selling A HUD Home!
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