Buying a home is probably one of the biggest purchases you will make in your lifetime. And if you plan well, you may have multiple real estate purchases in your lifetime. There are many options for purchasing a home. You can go through a licensed real estate agent or purchase from a homeowner that is for sale by owner, you can purchase through an online auction, you can buy at a sheriff sale. There are other strategies, but for the owner occupant, they would probably be far fetched. An investor is a different story.
The options don’t end there. There are short sales, fair market sales and foreclosures… I feel like we are in the Wizard of Oz… lions and tigers and bears… Oh my!
Don’t worry, there is a point here. Another option is to purchase a HUD owned home from the Federal agency, Housing and Urban Development (HUD).
These homes are not procured by HUD by way of a foreclosure. HUD acquires them by way of an insurance claim that the foreclosing lender makes to the insuring entity (FHA) for their loss after the foreclosure process is complete.
HUD is merely a holding company until the property sells. The money they receive from each sale goes back to FHA to continue to insure loans. It’s sort of cyclical.
The good news is, anyone can purchase a HUD home (except for employees and their immediate families of HUD, the M&M contractor, the LLB’s and preservation companies). Government entities, non profits, owner occupants and investors can purchase a HUD owned home.
The process is a little different than buying a fair market home. First, you need to find a licensed real estate brokerage that is approved by HUD to sell HUD homes. They need to have an active “NAID” number. If they aren’t, they won’t be able to complete the process of buying for you. The agent will need this NAID number in order to put your bid in. Yes, you heard me right… bid. You see the HUD offering process is a sealed bidding process. Only HUD and their M&M contractor can see the bids. The real estate agents can’t see any bids except those that they put in. Not even the listing broker can see the bids. As I said, it is a sealed bidding process.
If you are the winning bidder, then your agent will need to meet with you immediately upon winning the bid to get your deposit ($500 or $1000, depending on sale price) and sign some up front paperwork along with your prequalification or proof of funds statement. Once they upload those documents to the HUD portal, the esignature program will send you electronically the HUD contract to electronically sign. Once all documents are in and HUD signs your contract, then you move to the next step of applying for your mortgage if you are going that path, making sure that the title order is in and scheduling a home inspection, if you choose to do one. While HUD homes are sold as is, you are still entitled to a home inspection. A buyer can inspect that which is available to be inspected. What that means is if the electric or other utility can’t be turned on, you won’t be able to inspect it.
Once you complete the above, then your closing agent would schedule a closing to finalize the transaction and wallah! You own a home!
As with any of my blog posts, if you have additional questions, please feel free to contact me at firstname.lastname@example.org