HUD Homes
Some of the questions I get asked a lot by buyers that come across HUD homes in Peoria are "What is a HUD home?", "How are they different than other homes?" and "Are HUD homes a good value?".
The first question is always the easiest to answer. HUD homes are just homes that had an FHA insured mortgage that went through the foreclosure process and are currently owned by HUD.
Generally speaking, there is not a lot of difference between HUD homes in Peoria or any other homes for sale...after all, it is just a home. It is just the process that is slightly different. It is easy enough to walk a buyer through the differences between submitting an offer on a HUD home and a home that is a traditional sale.
The last question is the one I find hardest to explain as that is really up to the individual buyer to decide. I think the easiest way to help answer it is to look at the pros and cons of some of the quirks of HUD homes that most buyers experience.
Owner Occupant Restrictions
Pro - Most buyers experience the frustration of losing a property to an investor that can close quickly and pay cash for a home. HUD does restrict most homes to owner occupants, people that will live in the home for at least one year. It is a relief to most buyers that they will not be competing against investors on these homes.
Pricing
Pro - HUD homes are usually priced lower than most homes in a neighborhood. The price is based on an FHA appraisal, so a buyer using FHA financing does not need to pay for a new appraisal to be done so long as the pricing appraisal is still valid. It might not seem like a lot, but everyone likes some extra money in their pockets, right?
Con - HUD homes can be very competitive as most are restricted to owner occupants which can lead to higher prices. Last month, average HUD homes in Peoria sold for 5% above list price. Since the list price was based on an FHA appraisal, any amount an FHA buyer offers over the list price is the responsibility of the buyer as a lender will not lend over an appraisal. Depending on the home, that can be a lot of cash coming from the buyer.
Utilities
Con - HUD homes do not have the utilities turned on. Once an offer has been accepted by HUD, the buyer can obtain permission to turn on the utilities for three days for inspections. The cost of turning on the utilities falls to the buyer which can negate the money saved on the appraisal. And if the property has a pool, the lack of utilities can be a problem as pools at HUD homes are drained before being listed. In the summer, the hot Arizona sun can cause damage to a drained pool which can lead to costly repairs down the road.
As with all homes, each HUD home is different. Some are in perfect condition, others need lots of work. It is really up to the individual buyer to determine if a HUD home is a great value to them or not. Understanding some of the quirks that goes along with purchasing a HUD home can definitely help a buyer make that decision.
Comments (0)Subscribe to CommentsComment