Housing and Urban Development (HUD) homes are residential properties that have defaulted on a Federal Housing Administration (FHA) loan. It is a special type of foreclosure where the property becomes owned by government by extension of the HUD division. These properties can go for cheap, but are they worth it?
In many cases, they are. However, HUD homes require a little more patience because these types of auctions deviate from the norm.
There are two periods of a HUD auction – a time period where only owner-occupiers may buy, and then a time period where real estate investors may buy.
If you submit your bid during the owner-occupier period, then you must live in the home for at least 90 days after the title is transferred to your name.
HUD Auctions and Earnest Money
Earnest money basically a fee that secures your bid. If your bid does not win, you will get this money back. If you are unable to follow through on your winning bid, one of the penalties is that the HUD division keeps your earnest money.
The Pros of HUD Auctions
Pre-appraised. HUD homes have already been evaluated by credible government appraisers. These appraisals also have the added benefit of taking into account the repairs needed.
Special discounts. Depending on your profession, you may be granted you exclusive discounts for being a teacher or serviceman. For a full list of those eligible, click here.
The Cons of HUD Auctions
Special checks. HUD auctions will take into account your income and credit score. These checks can be waived, however, if you have obtained funds from outside sources (such as a hard money loan).
No special financing. HUD does not provide any type of loan options, which again can be overcome by seeking a […]