You have heard about the record numbers of foreclosures across the country. For smaller investors, now is an ideal time to look at HUD properties. The U.S. Department of Housing and Urban Development (HUD) acquires homes when there is a foreclosure on a home that was purchased using a loan insured by the Federal Housing Administration.
HUD homes are priced at the current fair market value based upon an appraisal. If the home is in need of repairs, the price is adjusted accordingly. HUD homes are sold "as is," i.e. HUD is not responsible for repairs and improvements.
HUD homes are very easy to research. They are all listed on a website of the asset manager, Michaelson, Connor and Boul ("MCB") http://www.mcbreo.com . You can research properties by state and by city or county, and there are new properties added every week. Properties are also very easy to view; all HUD homes are keyed to the same key and HUD certified real estate agents can buy a HUD key and show any HUD homes - no appointments are required.
Properties are sold using a silent bidding process. There is an initial period (10 days), during which offers are accepted only from owner occupants. HUD will only accept a bid if it meets the threshold for the property (lowest acceptable amount), and HUD will accept the highest net bid received during that initial period. Some properties, of course, sell during that time frame, but many do not.
The properties that do not sell during the owner occupied period are then open for bidding by investors. You can research if offers have been made on any properties on the MCB website, and see what offers were unacceptable to HUD. Over time, the prices on properties that have not sold are reduced, so that there are many properties today that have listing prices that are below the appraised value.
You can submit an offer at any time, and you will have a response by 4:00 p.m. eastern time on the next business day. All offers are submitted on line, and you must have a HUD certified agent submit the bid. There is a listing of HUD certified agents on the website, and if you are looking to buy in the Denver metro area, I can help you. (Vicki@PorterHouseRealty.com 303.995.3100)
The contract itself is very simple. You must indicate the offering price, the amount of the closing costs and commission to be paid by HUD, and the buyer information. HUD will pay up to 3% of closing costs and up to a 5% commission. You must have an earnest money check at the time you make the offer in the form of a cashier's check. The amount of the earnest money is generally $1,000, but depends on the purchase price of the property that you are buying. There is no contingency in the contract regarding financing, so you should be confident that you will be able to qualify for a loan before you submit a bid.
If your bid is accepted, your agent is notified. While the original offer is short and sweet, if your offer is accepted there are several disclosure forms that will have to be signed and delivered to MCB within 48 hours. You will have to submit a lender letter or proof of funds to close at that time. HUD will set the closing date; usually 30-60 days from the date your offer is accepted.
There are some great opportunities to purchase properties under market - if you know your market and choose wisely.
Vicki S. Porter, Broker, Denver, Colorado
http://www.PorterHouseRealty.com
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