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How do you purchase a HUD Home?
The procedures for buying a HUD home are different in several aspects to those involved in purchasing a home the more traditional way. Considering that such dwellings are essentially owned and managed by the government through its various entities, the overall sales process has to be transparent, accountable, and follow specific rules and regulations.
So, how do you get to purchase a HUD home? Well, the first step is:
Finding a HUD home of interest:
All homes being offered by HUD are instead listed on HUD’s website RealtyStore.com. You can search for homes of interest by, amongst other things, looking at state, by county, or by city; even zip codes if you know them.
You can also search for homes by checking out some of the programs or incentive schemes on offer, such as “Good Neighbour Next Door”, “Non-profit,” or “$1 Homes, Government Sales”--details all being on the HUD website.
It’s also possible to determine the status of each property and refine your search by specifying the number of bedrooms or bathrooms.
What you won’t find are these HUD homes on any Multiple Listing Service or broker’s websites.
What’s the process by which HUD homes are sold?
Apart from how HUD properties are listed, another key difference is that all HUD homes are sold at auction. This goes back to being owned by the government, which means that the sales process has to be transparent and open.
It’s necessary to hire a real estate agent who HUD has approved to arrange to inspect and bid on these types of properties. The home will sell “as-is,” Typically, HUD will not undertake any repairs or improvements. Therefore, having a home inspection to determine the value of the property and how much needs to be spent to get it into livable condition is very important.
Potential owner-occupiers are given preference as encouragement of homeownership is one of the critical objectives of government policy.
Therefore, there is a 30-day time period during which bids from owner-occupant buyers are accepted. Once this period ends, HUD will review all of the recommendations and choose the highest offer. However, if none of the proposals are considered acceptable, the period for bidding will extend, and this time opened, investors can participate. Investors will typically look to either acquire HUD properties, renovate and sell on or, after renovation, hold for their recurring rental income.
The appointed agent will contact anyone making a winning bid on HUD to provide more details of the process and confirm a settlement date. Such settlement date will typically be 30 – 60 days after that.
Almost all buyers should be able to purchase a HUD home with a typical mortgage provided by government-backed entities such as Fannie Mae or Freddie Mac, although there are also alternative options.
For example, current and former service members can purchase HUD homes with VA loans. Those with lower credit scores can apply for loans from the FHA, some of which also cover the costs of renovation.