This is a Great Explanation of What is HUD Home? I am often asked this question, and the answer could not be explained better. Buying a HUD home is an as-is sale, but can be a great buy. You must have an agent to represent you to make the purchase!
What is a HUD Home? I can hear your thoughts already: 'DUH ... It's a home owned by HUD!' True enough, but are you confident you know enough about them to make it a daily double?
Yes, HUD Homes are owned by HUD, but who is HUD anyway? And what characteristics make a home eligible to be a HUD Home?
First Things First
HUD is an acronym for the United States Department of Housing & Urban Development. It is a critical federal agency whose leader (The HUD Secretary) is a cabinet-level appointment that reports to the President of the United States.
Have you ever heard of an FHA loan? Well, FHA stands for Federal Housing Administration, and it is a department within HUD whose Commissioner reports to the HUD Secretary.
FHA promotes homeownership in a number of ways, including providing loan guarantees to private lenders for making low downpayment FHA loans to homebuyers.
Cliff's Notes Version
Before your head starts spinning with all the alphabet soup and Realtor®-ese, here's the basic English version:
- HUD wants Americans to be able to purhase homes
- FHA sets guidelines for what qualifications a buyer must have
- Banks qualify homebuyers based on this criteria and give mortgage loans to homebuyers
- FHA insures these mortgages, promising to pay back the lender if the homeowner ends up in foreclosure
- Banks then see the FHA guaranteed loans as a low-risk and make loans directly to homeowners
When those homeowners cannot pay their mortgage, the bank forecloses and then cashes in on the FHA insurance guarantee and gives the house back to HUD.
So, when you are buying a HUD Home, you are buying a foreclosure directly from the federal government, and it is ALWAYS SOLD AS IS.
For A Quick Recap ...
If you were on Jeopardy!, here's what Alex Trebek would say, 'This special type of American real estate has the following characteristics:
- A one to four unit property
- With FHA insurance on the mortgage loan
- Which is foreclosed on by the original lender
- Who then files an FHA insurance claim
- And signs over title to the largest U.S. Housing Agency
And then you would push your buzzer (first, of course!) and give the only acceptable answer: "What is A HUD Home?"
Stay tuned for our upcoming post on Common Myths and Misconceptions About HUD Homes. Better yet ... SUBSCRIBE!
If you are looking for information on how to buy a HUD Home, you've just found your one-stop resource. If you are interested in buying a HUD Home in Southern California, we can help you directly.
If you are interested in buying a HUD Home nationwide, we can refer you to HUD-Registered brokers and agents who are trained on the most recent HUD procedures and actively selling HUD Homes in today's market.
ABOUT THE AUTHOR
A lover of music, travel, languages, cultures and people, ANGIE NWANODI is the Founder and Principal of The ACG Group, Realtors®, an agent team practicing under Evergreen Realty & Associates, Inc. Angie started in the real estate industry in 2000 as a Policy Analyst for a national nonprofit housing developer, eventually becoming its Director of Policy and having the honor of testifying before Congress on the preservation of affordable housing during her tenure. Angie went on to start her own residential real estate practice in November, 2005.
THE ACG GROUP, REALTORS® are distressed property experts with specialization in HUD, REO and Short Sales. As one of 54 California Local Listing Brokers for the U.S. Department of Housing and Urban Development (HUD) through PEMCO, Ltd., we offer training and community events for real estate brokers and agents, homebuyers and investors interested in mastering the process of buying a HUD Home.
CA DRE #01466683