The Pamela Madore Group
Keller Williams Realty
How To Buy A HUD Foreclosure
It is always tempting to want to buy a foreclosure. Read this carefully before you decide so you know all the rules.
THEY ARE NOT ALWAYS A GOOD DEAL
Contrary to popular belief, not all foreclosures are a good deal. As a matter of fact, some are very bad deals. You have to be very careful when deciding on whether or not to bid (make an offer). On the other hand, some are very good deals. It seems that HUD has no rhyme nor reason how they price the houses. You can keep a constant eye on what is available at the HUD real estate site. If you see one you like just call us and we will show it to you and put your bid in.
|This may be an investor|
HOW TO GET FINANCING
Financing can also become an obstacle. The house may need some repairs before a bank will accept it. HUD will do no repairs. Of course, cash always works. If you don't have cash and the property needs repair you could consider an FHA program called a 203K which provides you with cash to do the repairs. HUD will not always allow a house to come back into the FHA program. A conventional loan is usually less stringent on repairs but the house has to have floors and windows at least. Each house is different so let us help you with that.
WHAT IS A PROPERTY CONDITION REPORT
For each property HUD does what is called a property condition report. They hook up a generator and do what tests on electric or anything that is electric in the house. They apply pressure to the water to see if there are any leaks.
|Here is an example of a Property Condition Report|
Unfortunately, this report isn't really that thorough. For instance, if there is a water leak somewhere so that it won't hold pressure it could be that the washing machine hose is broken or it could mean that the house needs a whole new water line.
HOW TO DO INSPECTIONS
All HUD houses have no utilities turned on. In order to do inspections it is your responsibility to have the utilities turned on. Most (depending on the time of year) houses have been winterized so you will need a plumber to come and "un-winterize" and then come back and re-winterize. All of this has to be done in a 48 hour time frame. However, if the property condition report said that the water didn't hold, they won't let you do anything regarding testing the water.
|Have your inspections.|
HOW TO MAKE AN OFFER
Only Realtors can make offers. We make them through the HUD website. The information that is needed is who is going to be named on the deed and their marital status. We need your address, social security number and phone number. HUD will pay up to 3% in closing costs so you may want to consider that in your bid. If the property is under $50,000 then we would need a $500 earnest money deposit and if it over $50,000 we need a $1000 earnest money deposit. These are cashiers check made out to the title company. If your bid is not accepted you get it back.
|Just Need Your Basic|
CAN I MAKE AN OFFER AT ANY TIME
As I write this, there are 10 HUD properties for sale. One is a lottery, seven are exclusive and one is extended. Depending on its status, we can determine when you can make an offer.
Lottery as defined by HUD:
Law enforcement officers, pre-Kindergarten through 12th grade teachers, firefighters and emergency medical technicians can contribute to community revitalization while becoming homeowners through HUD's Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return you must commit to live in the property for 36 months as your sole residence.
Only people that can follow that guideline are eligible for that property.
Only people that are going to live in the house as their primary residence can put in a bid. HUD does not open these bids for 10 days and then looks at them all at the same time and chooses which one is the best offer. If they don't select any of the offers then any additional bids are opened daily.
Anyone can bid on the property. This is the stage that investors wait for. Those bids are open daily.
The process itself, that is the paperwork, is quite simple. You do have to use blue ink and you have a 48 hour time limit to get all of the paperwork to the management company.
|The Clock is|
Here is a little trick I learned that worked out very well for one of my clients. He made a low offer that was not accepted. However, in the offer there is a place to check a box that says "hold for a back-up offer". Well, I had checked that box and a few days later I get an acceptance notification from HUD that his bid had been accepted. Everyone was happy.
Some agents will steer you away from foreclosures because they haven't done one and don't know the paperwork. I will only steer you away if it is a bad deal because I know all of the paperwork.
The Pamela Madore Group
Pink House Team
Keller Williams Realty
3955 S. Soncy
Amarillo, TX 79119