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How to Buy a HUD Home Foreclosure
Buying a HUD (Dept. of Housing and Urban Development) home is a little different than buying a bank foreclosure; in that HUD is a federally funded administration. FHA (Federal Housing Administration) is the organization in the HUD program that federally insures mortgage insurance.
If the homeowner bought their home with an FHA loan, and then he/she could not make the payments, the lender can file a claim and the insurance. Then the lender collects the money from the insurance claim, and then HUD becomes the owner of that property. With a HUD home foreclosure, the property is appraised and then goes for sale at fair market value.
Many buyers are attracted to HUD home foreclosures because the price of the home is adjusted if the home needs repairs and renovations done to it. If it is going to cost the buyer $20,000 to make repairs the price of the home will come down to reflect the investment they will have to make for the work to be done to the house.
HUD does not fix the houses and sell them, whoever buys the homes are responsible for all the renovations. If you are interested in buying a HUD home you can visit hud.gov and see the properties for sale. You can click on single family homes, or multi-family properties and you will see the HUD home listings.
If you have found a home that you are interested in you can then contact a HUD approved realtor. The realtor will then show you the property. You cannot approach HUD on your own to buy a property, you must be represented by a HUD approved agent. When you have found the HUD home that you are interested in, you can't just make arrangements to buy it. You must make a sealed bid to what you will be willing to pay for the property. There is a time period specified for bidding on the HUD home properties, and when that time has expired the bids will be opened and the highest bidder gets to purchase the home.
If for some reason the highest bidder did not complete the purchase of the home within a specified time (30-60 days after the settlement date) , the property become available for purchase by the next highest bidder. HUD home foreclosures cannot be financed by HUD, the buyer will have to get financing through a bank, credit union, or some other means of financing. When you bid on a home you have to put up some earnest money. Always make sure you have financing secured before you make a bid on the property, because if your bid is accepted and you do not make good on the purchase, you will forfeit your earnest money.
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