There some clear differences you and your agent must understand when dealing with Hud. The contract is very different and you must use the Hud contract and Hud Addendum. This is critical because you just cannot buy the home without these forms and your agent should be sure to explain both sides of the contract. The back side of a Hud contract contains all the fine print. Hud also has a fairly new online bidding system and you want an agent familiar with this system.
The agents' Broker must be registered with Hud before any of their agents can even submit bids. This should be discussed with your agent during your very first conversation. Bids can be submitted until midnight each day Monday through Friday (you can submit bids on the weekend, but they count as if done on Monday). In most states new listings are posted each Friday, usually by mid-day, with bids due the following Tuesday for full price Owner-Occupants only. An experienced agent will know this and explain this to you, but remember, the exact days are different in many areas.
The New Listings are made available to Owner-Occupant bidders who are prepared to pay full price during the initial bid period. If the property is not sold during this period it will be made available to Owner-Occupants who want to make an offer less than full price (of course you could always offer full price at any time if you really want the property). If the property is not sold during the next seven days it will be made available to All Purchasers (including investors). The exact number of days between each change can differ from state to state which is yet another reason to be sure and deal with an agent who has experience with Hud. Hud has also been known to change the rules often, particularly in the last year as they have different M&M Contractors handling sales in various states. It is quite a task for an agent to keep up with Hud, which is another benefit of bookmarking www.USHUD.com - you will always get themost recent updates with an explanation.
In addition to a good agent it is a good idea to speak to a lender familiar with Hud Homes and in particular, find a lender who is knowledgeable about FHA 203k loans. These loans will help you get the money to make the home purchase AND get the funds you will need to fix up the property. It is this program which helps you get the maximum benefit and the maximum "sweat equity" when buying a Hud foreclosure or any foreclosure. Part of the American Dream is to buy a home and fix it up so that it is worth more than you paid for it - the FHA 203k is one of the best ways to achieve this.
The FHA 203k loan helps to protect you from yourself. It requires a Hud approved inspector to thoroughly review the property pointing out the required repairs and discussing with you the repairs you would like to have completed. This is sort of a "wish list" because they will lend you all the money as long as you qualify for the loan amount. The minimum, however, is $5,000.00, but these loans include paint, carpeting, kitchens, baths, windows and even draperies and a whole lot more.
The best part of these loans is that the person who inspects the home for you in the beginning is the same person who inspects the home as the work is completed in order to approve draw requests. You have to complete some work before the repair money is released to you, therefore you have to be prepared to lay out the money or get a contractor willing to wait for the draw inspection. USHUD.com can get you a referral to a contractor through their Improvenet.com Affiliate Program.
While you are not required to get a FHA 203k loan and there are many properties that do not need extensive repairs, the program is very helpful in making you think about what you are getting into and providing independent inspectors to try a make sure the work is done properly and that the home is in overall good condition.
If you are purchasing an Insured property (IN), no repairs are required, no appraisal is required, but you should absolutely, positively get a home inspection from a certified home inspection company. Your agent should be able to tell you the procedure for turning utilities on before the inspection; Hud doesn't always get the condition of major systems right. Your agent must make the request to turn on the utilities after Hud accepts your contract. You will then have 21 days in which to conduct the inspection. There is a separate Hud Addendum that covers many specifics regarding this process and why you should get a Home Inspection. A good agent will know this and be very helpful explaining and coordinating the process.
You cannot delegate the responsibility for making a smart home buying decision. Take the time to learn from web sites such as www.USHUD.com and www.hud.gov . Then go out and find a real estate agent who is knowledgeable, be sure to get a Home Inspection or a good Hud Inspector for a FHA 203k loan and you will have managed the risks and increased the rewards of buying a Hud Foreclosure property.
(c) 2000 Vito Simone (used by permission). Vito Simone is a licensed real estate broker in Baltimore, Maryland and has been licensed since 1988. He is the broker of record for Tenant Buyer Homes, has nearly 1,000 completed transactions and extensive experience selling HUD, VA and bank owned foreclosures. You can check out his web site at www.tenantbuyerhomes.com
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