Most people know that “HUD” stands for the U.S. Department of Housing and Urban Development. Most people associate HUD with subsidized rental and low income housing. However, HUD offers a great deal more than these programs. One of the greatest sources of great potential bargains for both owner-occupants and investors is HUD-owned homes… “HUD Homes.” However, like any other opportunity to uncover potentially great value, the need to do your homework is critical. As the saying goes: “Solid analysis identifies great opportunities,” and there is no substitute for good research.
What is a “HUD home?” In a previous edition of this blog, I defined and discussed bank-owned foreclosure properties– “REO’s” (”real estate owned” by the lender after foreclosure). Simply stated, a “HUD home” is an REO that is owned by the Department of Housing and Urban Development. HUD acquired the property because it was originally financed by a bank using an FHA (Federal Housing Administration) insured loan. The owner of the home defaulted on the mortgage, the bank foreclosed the mortgage and FHA paid the bank what was owned. When FHA paid the bank, the bank transferred ownership of the home to HUD. HUD then attempts to sell the home at “market value.”
Anyone who has applied for a mortgage in the last several years probably knows that FHA insured mortgage financing is what now enables the majority of owner-occupant buyers to secure financing for their purchase. It is by no means limited to low income or ”affordable” housing. The purchase price limits for FHA-insured financing vary from state to state and county to county. It is based on the median house prices for a particular area. In Mecklenburg County, NC, where I am located and do most of my business, the limit was $307,000 in 2010.
When a HUD home is offered on the open market for sale, it is first offered to owner-occupants. HUD establishes an “as is” value and an asking price somewhere below that value. If the property has not been sold in 30 days, it then becomes available to investors as well as owner-occupants.
HUD even offers special discounts under its “Good Neighbor Next Door” program to police officers, EMT workers and teachers. If a person is employed full time in one of these vocations, he or she may get a discount of 50% off the list price of the home, but that person must not own any other residential real estate and he or she must make the HUD home his or her sole residence for three years. Certain other restrictions also apply, but the program can offer extraordinary opportunities to people who meet the requirements.
How does a buyer purchase a HUD home? An offer must be made through a HUD-approved real estate broker. Of course, my firm is approved for HUD purchases. An offer or “bid” is made online, through HUD’s private contractor, HMB, Inc. A condition report for each property is available by clicking a link on the property description detail page. The property is sold to the winning bidder “as is,” with no warranties. However, the buyer has the right to have the home professionally inspected and is encouraged to do so. There may be escrows for certain repairs. In fact, 203K renovation financing is even made available, whereby the loan for the purchase of the property may also include amounts estimated by a licensed contractor as necessary for repairs and updating of the property. (See the December 1 edition of my blog devoted to a discussion of 203K financing.)
Instead of listing several “best buys” below, as I usually do at this point in my blog, I will refer you now to the website where you can view the entire inventory of HUD homes available. Go to http://www.hudhomestore.com . On the home page, click the tab near the top left corner labeled “Search.” From there, a map and drop down menu will appear. Choose the state you are interested in. (I work in both NC and SC, and greater Charlotte borders South Carolina, so it is not uncommon for people to work in Charlotte and live in Rock Hill or Fort Mill, SC.) After you have chosen the state, you may search by city… or zip code… or “price reduced” homes, etc. Photos and condition reports are available on the detail page for each property.
Of course, I am well equipped to help you investigate your options with respect to bidding on or purchasing a HUD home, and I would be more than happy to do so. This continues to be a ”buyer’s market,” and there are many other great opportunities on the market at this time. Naturally, one of the main reasons I take the time to publish this blog is to offer to go to work finding youa great deal on your next home or investment. It’s what I do best, and I love what I do. As I have said in every edition of my blog, “solid analysis identifies great opportunities.” I would be more than happy to answer any questions or read any comments you might have. Take advantage of all the tools and resources available on my website, including the ability to SEARCH THOUSANDS OF HOMES FREE: http://edorer.wilkinsonandassociates.com . Or please feel free to contact me.
The next edition of SOUTH CHARLOTTE REAL ESTATE BEST BUYS, with new information, observations and “best buys” will be published on or before January 1, 2012. Thanks for your interest.
Eric J. Dorer, BS, JD
NC/SC Broker/ Realtor
Wilkinson & Associates Real Estate
(980)875-0950
e-mail: ejdorer@gmail.com
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