Investing In A HUD Home By Larry Goins
Real estate investors have begun taking notice of HUD (Housing and Urban Development) homes as a great place to find investment opportunities. Many investors, though, do not even know what a HUD home is and aren’t sure if they are eligible to apply for a bid on a HUD home. Basically, a HUD home is an FHA or HUD insured mortgage on a home where the buyer ends up unable to make the payments on the home causing the lender to foreclose on the home. FHA will then pay the lender what is owed and HUD will take ownership of the home. From here HUD sells the home at market value, usually through an auction or bidding format to get rid of the house as soon as possible.
The best part is that almost anyone who can afford a mortgage or who can pay cash on a home is eligible for purchase of the home, making this an excellent opportunity for real estate investment. Since HUD homes are often sold right at or below market value to get rid of the home as soon as possible, then there are a lot of great deals waiting out there. A real estate investor must keep in mind, though, that HUD homes are sold as is. This means that if the previous owner trashed the home then the investor will have to take the home in that condition. This does not mean that all HUD homes are in poor condition, as many are well maintained, but the owner simply had financial difficulty and could not continue making payments, so the bank had to foreclose. The safest bet for investing in a HUD home is to have a real estate agent or HUD employee set up a tour of the home before the auction on the home begins. This way the investor can assess how much work needs to go into repairing the home before resale. Keep in mind that usually “deals” made on homes such as warranties or added appliances will not apply to HUD homes as well. As is or sold as is means just that. If the home comes furnished with no appliances then it will up to the investor to spend money furnishing those appliances. If there are problems with the building being up to current building or zoning codes, then again it will be the investors concern to fix before reselling the house. Housing and Urban Development suggests going ahead with an inspector before actually placing a bid on the home, so that the investor can see exactly what type of cosmetic and structural repairs will be needed before purchasing the home.
Sold as is does not mean that HUD homes don’t offer any incentives for purchase, as most will offer a small allowance for upgrade on the property, for moving expenses or bonuses for closing early or paying upfront. Most HUD home sale prices will also reflect the amount of work that needs to be put into repairing the home for living or resale conditions, so keep this in mind as you begin searching for HUD homes. If a home is priced way below market price, you can begin to assess that it may need a good deal of work before a resale is complete. Make sure to get in touch with a real estate agent who deals with HUD homes so that they can help you with the specific details about dealing with HUD homes and the inside scoop on how HUD homes are priced.
Although almost anyone is eligible for a HUD home, keep in mind that many state HUD organizations or charitable organizations will try to reach out to lower income families when HUD homes are available, allowing these families the opportunities to bid on the home at auction as well. This may make bidding on a HUD home more competitive for the investor, but it really depends on the area in which the HUD home is located, as well as the current market value of homes when the auction begins. Most states and counties will set up a certain time period where primary residence sellers can bid on the home and once that time period is up without a bidder, the bidding will open up to all investors. Some states and counties do not have restrictions on who can bid on a HUD home, as long as that person is ready with a pre-approved mortgage or money already in hand for the purchase of the home. HUD does not offer particular loans or require certain loans, although they do offer names of mortgage programs and mortgage companies who the seller can go through to purchase the home. To find out what a particular state’s requirements are on HUD homes, speak to a HUD representative, a real estate agent or another investor who has dealt with HUD homes before.
If interested in finding out more about HUD homes, the best place to begin searching is at www.hud.gov where homes are updated on a daily basis for those searching. Usually the database will provide information regarding the open bidding for primary residence owners and then the date that the home will be available for investors to begin placing bids on the home, as well as the market price of the home. Remember that since HUD homes are marked considerably below or right at market value in the area, other investors may be bidding above that selling price, so be prepared to discuss a suitable bid with your real estate agent.
Most area board of realtors’ websites will also place HUD and foreclosed homes on their websites to allow for more access to buyers. Real estate investors looking for HUD homes may also want to search through the county websites for possible lists of foreclosed and HUD homes that will be going up to auction in the near future. Usually a list is kept a few months in advance to allow investors an opportunity to find out information on the home before auction begins.
To learn more about the author, Larry Goins and how he buys and sells 15-20 houses a month without even seeing them, click here: http://www.marketerschoice.com/app/?Clk=1593293