I am often asked “What is a HUD home?”
HUD stands for Housing and UrbanDevelopement. The homes they sell are usually the best deals on the market.
There are lots of people that buy homes with Federal Housing Administration (FHA) loans. These low down payment loans have mortgage insurance provided by the federal government. If a homeowner doesn’t pay their mortgage and default on their loan, the FHA guarantees that it will buy back the home from the lenders. When these homes go into foreclosures, they become the properties of the Department of Housing and Urban Development (HUD). HUD is not in the business of buying and selling homes, so they want to sell the homes quickly. The homes are listed online at a discounted price and HUD starts to sell them. Priority goes to owner occupants, but investors can purchase these homes if no owner occupants put in acceptable offers, usually after the home has been on the market for 10 days.
Disaster victims and “Good Neighbor Next Door” participants (community workers, such as teachers and police officers) are offered deep discounts on some HUD homes. If they aren’t sold through these programs, they are usually listed close to the fair market value. Buyers can then bid on these homes by having their real estate agent put bids through an online listing site. Buyers cannot place their own bids, they must work through an agent. These bids are collected for a set period of time, usually the first 10 days and then HUD chooses the winning one for each home. Usually the highest offer gets the home. The bids are closed to investors for the first 15 days, HUD’s mission is to grow the sense of community in a town, and this is better accomplished by selling homes to owner occupants, rather than investors who will rent them out. Even in open bid periods when investors can bid, owner occupants will always be considered first. If the buyer’s bids is accepted, the agent will get all the paperwork from HUD signed by the buyer an returned to HUD. Buyers must pay a small earnest money deposit showing that they are serious about the contract. There is an inspection period and finacing contingency written into their contract.
Most HUD homes at least here in the northwest seem to be pretty low end abused homes, but this is not always the case. I recently sold a beautiful HUD home on acreage that had well over 15 bids and went for well over the asking price as well.
If you’d like some more info on HUD homes and what’s available give me a call at 360-739-6981.