First time home buyers the Deck is stacked against you

Real Estate Agent with

Last month, again, we saw a drop in first time home buyers on a national level. In many ways the deck is stacked against them. Yes the market is good . Interest rates are still low but......

Let take for example buying a HUD home. So you meet a couple looking for their first home. They do not have a lot of money, but they have good credit and stable jobs. They also are willing to roll up their sleeves in a home or maybe even have family members who have skills and are willing to help out in a fixer upper.

So you go and make sure they are prequalified. You recommend a HUD home. Why ? Because HUD gives preference to buyers who are going to live in the home. This will help your folks who probably cannot compete with  all cash investors in the foreclosure market. You bid on the home and you get it. Now the problems start.

1 As we all know in order to buy a HUD home today you have to bid over the asking price. Some banks are not sending out appraisers and are using the HUD appraisal. This means the buyer has to come up with the difference in cash.

2 After the inspection and the appraisal is in no matter how much time you give a bank usually they will come back with conditions about 5 days before the closing and then of course need more time. In many areas this will cost the buyer 375 for an extension. Remember you are dealing with first time buyers who are squeezing their pennies.. Many conditions involve the property. Even though HUD escrows money you will have to deal with this issue.

The bottom line is on a HUD home if you are getting a mortgage it can be a real problem. In the foreclosure market you are competing against investors who are all cash.

Are there homes out there first time buyers can buy ? Sure. But they will not often be the least expensive. I have worked with many first time buyers and helped them buy HUD as well as foreclosed homes. Buyers you need a good Realtor who can help you navigate this market.

Yes the deck is stacked against you , but working with a professional can help you even out the field.

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Charlie Ragonesi All Mountain Realty Big Canoe and Mountain Blog

On line at Call at 706 579 1098

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John Handschuh ABR SRES
RE/MAX Action Realty - Warrington, PA
Bucks County Real Estate

Awesome advice Charlie,

It is difficult out there for the first time buyer. But they can capitalize on the market if they have all their ducks in a row.



Make it a great day !!

Jul 03, 2013 12:00 AM #1
Dena Smith
DSmith Realtors - Irving, TX

As you know HUD properties are listed at the FHA appraised value, so if your buyer is getting FHA financing that is your appraisal. I no longer recommend HUD properties because I don't feel they are consumer friendly. The property condition reports are rarely accurate. While the buyer has 14 days to inspect, that isn't nearly enough to mail out to get permission to inspect - provide the exact days the buyer plans to turn the utilites on AND off again. Arrange with every utility company - paying the fees AND scheduling with an inspector who is available. If a buyer manages all of that there is usually about 1 day left in the 14 to make requests from HUD or terminate. Add to that most of the time in Texas the buyer will be paying a re-winterization fee for a property that doesn't need to be winterized. HUD properties are not the 'deal' that consumers think they are - or maybe hope they are. In the few cases where they are a good deal, if the buyer needs to finance all their closing costs, they are out of luck - HUD will only cover 3%.

Jul 03, 2013 12:05 AM #2
Charlie Ragonesi - Big Canoe, GA
Homes - Big Canoe, Jasper, North Georgia Pros

dena thanks for the detailed level of comment

john thanks for your kind words

Jul 03, 2013 02:19 AM #3
Thom Abbott |770.713.1505 | Intown Atlanta GA Condo Living - Atlanta, GA
Midtown Atlanta GA Condos For Sale

Charlie....what would real estate be without SOME challenge?

I'd like to try it one day, but for now, even the buyers with credit, cash and's amazing what we still have to deal with. 

Jul 04, 2013 02:23 AM #4
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