HUD VS. REO A Newcomers Guide

By
Real Estate Agent with Benchmark Realty TN 288457

This BLOG is not meant for a seasoned agent or investor, it is a basic explanation of the differences between the two types of foreclosure sale properties.

 

HUD Homes  

Housing & Urban Development owned properties obtained primarily through the default of an FHA or VA Loan and in some rare cases government backed block grant loans for urban revitalization. These properties are primarily marketed through a Regional Sales Company such as First Preston, Pyramid Realty and or a local service providing brokerage. These properties are typically sold on a Bid Process and require the assistance of a licensed real estate agent. HUD properties do not sell to the highest bidder but the highest Net Yield for the property. In certain markets such as revitalization areas there are instances when individual bidders who work for the local Police, Fire or Schools bids are given special priority. Generally an Owner Occupant will always prevail over an investor despite Net Yield as HUD's main goal is individual home ownership.

 

REO Homes

These are bank / lender owned homes that have been foreclosed on and are being marketed by a local real estate brokerage on behalf of the bank / lender. These homes are sold primarily in As-IS condition with the Buyer assuming all risk for the condition. REO properties are sold with a clear title where all liens have been cured or remedied. This is also a Net Yield business where the Buyer who offers the most money with the least costs to the lender / bank will be the new owner. Lenders offer no preference as a rule to owner occupants over investors except in rare occasions where the bank / lender may have numerous properties mortgaged on their books in that specific area. A good example would be a Condo or PUD where 1 lender was the primary or prevailing lender. At that point the bank / lender may take a lower Net Yield to keep the property as an owner occupied property to protect the values of the remaining mortgages.

Just a simple and brief explanation of the basic differences in these two types of foreclosed properties

 Paul Moye

Your Middle Tennessee Real Estate Professional

For more information on REO and HUD properties in the Nashville  Market contact me at

paul@middletnrealty.com

www.middletnrealty.com

 

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Rainmaker
129,649
Kevin McGrath
Long & Foster Real Estate Companies- Fredericksburg/Spotsylvania - Fredericksburg, VA
Long & Foster Real Estate Companies
Good notes. I see a lot of REO's and very few HUD homes out there. I wonder why?
Jan 27, 2008 01:34 AM #1
Rainmaker
89,322
Paul Moye
Benchmark Realty - Franklin, TN
Broker, GRI, SRES

Kevin

How prevalant are FHA or VA loans in your market?

In my county FHA and VA make up less than 2% of all sales but in the neighboring county to the south FHA is over 30% of all loans. We almost never have a HUD property in my county, I sell at least 3 a year in the neighboring county.

It is all driven by loan limits and guidelines as to where the business exists

Jan 27, 2008 01:44 AM #2
Rainmaker
129,649
Kevin McGrath
Long & Foster Real Estate Companies- Fredericksburg/Spotsylvania - Fredericksburg, VA
Long & Foster Real Estate Companies

Paul,

We see a goot bit of VA, not much FHA. I don't have any real statistics though.

Jan 27, 2008 02:47 AM #3
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Rainmaker
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Paul Moye

Broker, GRI, SRES
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