5 Steps to Buying a HUD Home
by Pam Simpson
The Kudzu Vine
Since I get a lot of calls and emails from buyers who are thinking about buying a HUD home, I thought I would try to list the steps required to complete this unique type of purchase. Please note that this information is applicable to HUD home purchases in Northwest MS and may be different in you area.
1. Get pre-approved for loan
After deciding that home ownersip is right for you and your family, this should be the first step you take in ANY home purchase, but is an absolute necessity when considering HUD homes. To understand why this is so important, I need to explain a little about how offers to purchase HUD homes are different from other sales. When HUD places a home up for sale, they give owner-occupants (buyers who are going to live in the home) a bidding priority for the first 10 days. You see, HUD takes sealed bids from anyone (who is an owner-occupant) during that 10-day period and then awards the bid to the buyer with the best net offer to HUD. BUT...you can't place a bid if you are not pre-approved. So, if you wait to get pre-approved until you find THE perfect HUD home, the bidding priority may expire before you have the necessary documents to even place the bid. Of course, if you are paying cash you can skip this step but you are required to submit proof that you have the funds to complete the purchase.
2. Find the right home
Perhaps you have already found a REALTOR to represent you in the purchase of a home, but if you have not - now is the time to find one. Only brokers who have been approved by HUD to sell HUD homes can place the bid for you. If you are not sure, ask!! HUD homes vary in age, area, price, and condition. Some of them are in move-in ready condition and will qualify for FHA financing. Some need quite a bit of work but still can be purchased with an FHA rehab loan (FHA 203k). The vast majority fall somewhere in between. In Northwest MS, HUD places their homes on the market every Friday. Don't get discouraged if you don't find something right away.
3. Place the bid
As mentioned above, HUD takes sealed bids. Once you have found the house you want to bid on, you need to determine (A) what price to bid (B) if you are asking for help with closing costs, and (C) what type of loan you are getting. Remember...HUD is going to accept the offer that nets them the most. In Northwest MS, HUDis offering a special incentive if you purchase using an FHA loan. They will waive the normal 3.5% downpayment and only require a downpament of $100! The broker who is placing the bid for you must certify that they have the pre-approval letter for financing and the earnest money. Earnest Money is "good-faith" money that shows HUD you are serious about going through with the purchase. The amount HUD requires is $1,000 if the home is priced at $50,000 or over. The check must be in the form of certified funds (like a cashiers check). If you do not win the bid, your check will be given back to you. If you do win the bid, your check will be deposited in the broker's trust account. You will be credited with this amount at closing.
4. You won the bid - now what?
Now you have 48 hours to get the paper contract along with your pre-approval letter to the local management company for HUD. Your REALTOR will handle this for you. You and your REALTOR will need to coordinate the home inspections (if any) and the appraisal. It is your responsibility (as the buyer) to get the utilities turned on in your name to facilitate any inspections you require. HUD will let you know when and how long you can keep the utilities on for these inspections. If they believe there is probable plumbing leaks, they will not allow the water to be turned on. Remember...HUD home sales are AS-IS sales.
5. Its closing day
Finally, the day has arrived. Be sure to bring any funds required to complete the sale in the form of certified funds. Also, don't forget your drivers license. The closing attorney will require it for ID. Once you have signed the mountain of paperwork to complete the closing, you can start to move in. Please change the locks ASAP. As a matter of fact, you may wish to purchase new locks in advance. All HUD homes are keyed the same. That means that anyone with a HUD key can get in.
These steps are very general and may not apply to ALL cases. You may decide that you would rather purchase a non-HUD home. A lot of buyers decide that there are no suitable HUD homes in their area or price range and they switch to looking for bank foreclosures or regular non-foreclosure homes. Remember, the BEST DEAL is what is right for you!
TO GET FREE LIST OF HUD HOMES AND BANK FORECLOSURES IN NORTHWEST MS (Desoto, Tate, Panola or Marshall county) SEND AN EMAIL TO firstname.lastname@example.org AND PUT "FORECLOSURE LIST" IN THE SUBJECT LINE.
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About the author:
Pam Simpson is an Assoc. Broker with Bob Leigh & Associates, LLC in Northwest MS. Copyright© 2009 by Pam Simpson. All rights reserved...***5 Steps to Buying a HUD Home***
Disclaimer: All information provided by this author may be based on information collected from several sources and is believed accurate but not guaranteed.