The Drawbacks Of Buying A HUD Home

• Must Use HUD-Approved Agent: In order to view and bid on HUD homes, you must enlist the help of a real estate agent who’s registered with the agency.
• Home Is Sold “As-Is”: There is no negotiating with HUD – the agency will not offer to do work on the home regardless of the condition it is in.
• Restrictions On Selling: Owner-occupant buyers must live in the home for at least 1 year, and they may not purchase another HUD home for at least 2 years afterward.

The Benefits Of Buying A HUD Home

• Lower Pricing: Because HUD homes have gone into foreclosure, HUD is eager to recoup costs quickly. As a result, HUD homes tend to be priced slightly below market value.
• Priority Over Investors: Buyers, who tend to make a HUD home their primary residence, are given a 30-day window in which they can bid on the property before the auction is opened up to investors.
• Closing Cost Assistance: HUD will spend up to 5% of the purchase price to pay for closing costs.
• Low Down Payment: HUD enables buyers to make lower down payments and offers down payment incentives – like the HUD $100 Down Program – in certain circumstances.

Buying A HUD Home

If you’re interested in purchasing a HUD home, you should understand what this process looks like and how it differs from buying a traditional home. HUD homes are not listed on the Multiple Listing Service, so you won’t find them among your average home listings. HUD homes are instead listed on HUD’s website, HudHomeStore.com.

Unlike regular homes sold on the market, HUD homes are sold at auction. In order to view and bid on these homes, you must hire a real estate agent who has been approved by HUD. There is a 30-day period of time during which bids from owner-occupant buyers are accepted. Once the period ends, HUD reviews all of the bids and chooses the highest offer. If none of the offers are deemed high enough, the bidding process is extended and opened up to investors.

HUD Assistance And Buyers Programs

In order to further motivate individuals to purchase HUD homes, the agency provides certain incentives to home buyers. Some of the grants, vouchers and buyers programs that HUD offers include:

• Housing Choice Voucher Program (Section 8): Enables low-income families to afford homeownership by providing a recurring subsidy that assists them in making their monthly mortgage payments.
• One Dollar Program: Allows low- or moderate-income families to purchase HUD homes – which have been on the market for over 6 months – for only $1.
• Good Neighbor Next Door Program: Helps public servants, like teachers, police officers, firefighters and emergency medical technicians, afford homeownership by providing them with 50% off the purchasing price of homes located in revitalization areas.
• Non-Profit Program: Permits community and religious not-for-profit organizations to buy HUD homes for 30% off, so they can fix them up and resell them to first-time home buyers and financially strapped families.
• HUD $100 Down Program: Makes homeownership possible for owner-occupant buyers by forgoing the typical 3.5% requirement and allowing them to make a down payment of just $100.

What Are HUD Homes?

HUD homes are foreclosed properties that were originally purchased with FHA loans. Residential properties become HUD homes when a homeowner is unable to keep up with their monthly mortgage payments and defaults on their loan. The FHA steps in, pays the remaining mortgage balance to the lender and seizes the homeowner’s property.

In order to recoup the cost, the government will sell these homes, often slightly below market value, to encourage home buyers to purchase them. Although HUD homes are appraised to determine value and then priced accordingly, they are sold “as-is,” so no repairs or improvements are made to the home before it’s sold.

Any buyer who has the funds or can qualify for a loan is eligible to purchase a HUD home. While investors may purchase these properties, HUD homes are first offered to owner-occupant buyers, meaning, buyers who plan to make these homes their primary residence. However, they may not have purchased another HUD home in the last 2 years and must live in their newly purchased home for at least 1 year.