Thinking of buying a HUD Home?

Are you thinking of buying a HUD Home? Here are some important facts that you should know. A HUD home is NOT low-end, low-income housing. HUD Homes vary in price, location, and condition. Any buyer who can secure a loan or pay cash may purchase a HUD Home.

Buyers fall into two types of categories – owner occupant or investor.

Owner Occupant – A buyer who purchases a HUD Home as an owner occupant MUST live in the home for a minimum of one year. NO exceptions. Another condition pertaining to owner occupant is that they may NOT have purchased a HUD home as an owner occupant for at least two years prior. HUD will collect ALL owner occupant bids submitted during the 10 day owner occupant priority period and make a decision once all bids are collected. So, put your best foot forward during this time as they will take the bid which offers the best terms. There are NO counter offers with HUD.

Investors – You may also purchase HUD Homes. However, investors must wait until the owner occupant priority period has ended which consists of 10 days of market time. Re-lists consist of 5 days of market time. HUD properties are always listed on Fridays. Owner occupant priority period is valid until the following Sunday evening. Re-lists, however, are open to investor bidding on Tuesdays. HUD will collect ALL owner occupant bids submitted during the 10 day owner occupant priority period or 5 day priority period if it is a re-list. If no acceptable bids are submitted during that time, HUD will open the bidding to investors, with all bids due by 11:59 PM EST on a daily basis until a bid is accepted.

Now that I have addressed owner occupant and investor guidelines, I would like to offer some insight with regards to commonly asked questions pertaining to HUD Homes.

Offer Acceptance – One of the nice things about HUD is that once you get past the first ten days, they will give you a response to your offer the very next day. Your Realtor will receive an email notification the next day upon submitting your offer – after 4 PM EST. If your Realtor does not receive an email confirming acceptance, you can bid a higher amount that day. Remember, there are no counter-offers with HUD. If they do not accept your offer, you must continue to bid higher each day thereafter until your bid is accepted.

Bid Statistics – Buyers and Realtors have access to Bid Statistics on the HUD Website. However, the Bid Statistics are NOT displayed on the HUD website for at least 10 days so you will have to wait to see the bid history.

Home Inspection – Buyers have a 15 day opportunity to conduct a home inspection after the date of signing the contract. It is the purchaser’s responsibility to activate the utilities for the inspection. You must supply HUD with a request form in order to turn on the utilities. If your inspection reveals defects not disclosed by HUD, then you may send a copy of the inspection report along with a notice of dissatisfaction in an effort to cancel the contract and obtain any earnest money that you may have put down.

Closing – HUD gives you 60 days to close which is more than generous. However, if you must exceed the 60 days provided, they will charge you extension fees without exception. If the purchase price is less than $25,000, extension fees consist of $10 per day only available in 15 day increments. $25,000 to $50,000 is $15 per day only available in 15 day increments. And greater than $50,000, $25 per day only available in 15 day increments. HUD will only allow you 4 extensions which equal 60 days total.

There are three different types of Financing Types regarding HUD Properties.

IN – If the property is listed IN, it should qualify for 203(b) financing. In which case, there should NOT be any minimum property requirements needed.

IE – If the property is listed IE, this is the amount of the repair escrow. The specific items and repair amounts will be listed under “escrow information”. The repairs are to be completed by the purchaser after close. Repairs may include roof, plumbing, electric and heating. Buyers may finance the repair cost or escrow designated by HUD, in their mortgage. In which case, the lender is responsible for inspections or the repairs and authorizing release of funds. Repair escrow ONLY applies to FHA financing, not cash or conventional transactions.

UI – If the property is listed UI, it generally needs extensive repairs AND usually must be purchased with CASH or CONVENTIONAL financing. The only type of FHA financing available for these properties is the 203(k) loan which is a rehabilitation or renovation loan. This loan is only available to owner occupants. Please keep in mind that not all UI listed properties will qualify for FHA 203(k) financing.

I hope that you have found this information to be helpful. There are many misconceptions concerning HUD Homes. I wanted to take to some time to clarify several questions with regards to HUD homes. If you have any further questions, do not hesitate to contact Ben Lang Properties.

Tags: Ben Lang Properties, Buyers, First Time Homebuyers, Home Buyers, HUD, HUD Homes

This entry was posted on Wednesday, July 28th, 2010 at 8:00 am and is filed under Home Buyer, HUD Homes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.