Bank owned, Foreclosed, REO (real estate owned) mean these properties are now owned by a lender. This happens when a homeowner falls behind on payments (short sale status) and the bank decides to foreclose on the property.
A HUD home means a government-insured loan (FHA) gets foreclosed on and the Federal Housing and Urban Development pays the defaulted loan off, and then puts the home on the market.
What does a buyer need to do to purchase a HUD Home?
Like all other properties, you are required to show proof of funds (cash) or a pre qualification letter. This information shows Hometelos you have the funds or financing needed to be able to complete the sale in a specific amount of time. If you need to find a lender please start with YOUR bank, otherwise I work with a variety of lenders and I can help you find one that will fit your personality.
HUD requires paperwork immediately upon acceptance of an offer, so the sooner you prepare the better your chances of success will be!
Please understand that the biggest issue lenders face with FHA loans are Condition. FHA has strict requirements and the home has to be functional to be approved to sell FHA.
HUD requires a $1000 earnest check in the form of a Cashiers Check made out to the Title Company. I use Fidelity National Title Company because they close HUD homes, but you as the purchaser can choose your Title Company. We just have to be sure they close HUD homes. You will not need the cashiers check immediately however, once you have been notified your bid was accepted it is required that day!
You will need to decide what you would like your bid to start at. Think of a price for the property. Keep in mind that you, along with other investors, or home buyers are going to be placing a bid on the same property. It is in your best interest to contact your REALTOR and have he or she do a market anaylsis on the property for current market value. This gives you an idea of what homes are selling for in that neighborhood.
Your First Bid will need the following information so please be prepared to answer:
Cash or financing? Bid amount? How will you take title? We need full names etc. If its in a Trust: Trust name has to be used as purchaser. We will need the complete Trust name and a copy of the legal paperwork to submit. Does your Trust or company have an EIN? If not, we will need social security numbers.
Keep in mind that HUD HOMES are SOLD AS IS! Any inspections or repairs requested or required by your lender will be at your expense. Expect to pay for your inspections, appraisal, any repairs needed to bring the property up to functional condition, and closing costs.
Do you need a home inspection? Does your lender require an appraisal? If so for either of these, you, the buyer, will have to pay to have a gas meter put on the property, (if it has been removed) and pay to have the utilities and water turned on for the day. You are also responsible for repairs and any other fees incurred. MAKE SURE you understand that if you choose to not purchase the property after you have the inspection, repairs made, utilites turned on, etc. YOU ARE STILL RESPONSIBLE for payment!
The most asked question that I receive is in regards to closing costs. Yes, YOU have to pay for closing costs on top of the sales price of the home. You are also going to see that the Realtor commissions of 6% are also included in the price of the home.
Here is an estimate of closing costs based on a $138,000 sales price cash offer:
CLOSING COSTS ARE Separate from the sales price of the home – these are the fees required by New Mexico (this is est. based on a $138k list price)
Closing Fee: $460
Title Commitment: $100
Owner’s policy: $1019
Recording: $29.50 per document
Special Assessment: $50 if in ABQ
Prorata: $50 if in ABQ
Transfer affidavit: $35
Doc prep: $25
Wire fee $20
Fed ex $20 if applicable
Survey: $250 estimated (If property is in ABQ or RR it's required)
With all of this in mind you are now prepared to call your Realtor and write up your offer! If you are financing your loan you also HAVE LENDER FEE Requirements so Please plan accordingly.
Once your offer is accepted, you have 24 hours to submit all paperwork needed to complete your transaction or HUD has the right to terminate your offer and put the property back on the market.
Electric, gas and water have been shut off at every HUD home and meters have been removed. This means that in order for you to have PNM turn on the electric you have to pay to have an electrical inspection done. Gas: Plumber must test gas lines before NM Gas will turn the gas on.
Our Realtors at Latte Stone Realty, LLC 505-977-0786 are prepared, and ready to help make your HUD bid a success. Do you have questions? Please fill out the information and you will be redirected to a confidential questionnaire and one of us will help.