HUD Homes for Sale – Five Things Home Buyers Needs to Know Before Making a Bid
You may have read about HUD Foreclosure Homes for sale. You may have read what is it about and have considered buying one. If you do, this article may help you on what things you should know before bidding on a HUD foreclosure home.
What is HUD Home for sale? HUD Home for sale is FHA insured loans that have been foreclosed and has have been taken possession by the HUD to recuperate their loss. But, the rules for buying HUD homes for sale are different for home buyers and investors. HUD assigns the HUD house to a Management and Marketing (M&M) Contractor who clean it up and had it appraised by an FHA appraiser.
Although buying a HUD Home that is for sale sounds promising and simple -well, they come in low prices and usually in excellent condition so it is promising and the government made it simple to buy them- you still have to know things before making a bid or even cash-buying a HUD home.
Since everyone with cash needed or who can get a mortgage could buy a HUD homes for sale, HUD homes have been eyed by potential homebuyers when it is up in the online listings. But there are things to know before bidding on any, they are:
1) Loan Pre-Approval: before buying any property, you will need a pre-qualification letter from a lender of proof of cash funds that is greater than the price of the house you want to buy. It is your own responsibility to make your own financing arrangements, since the HUD won’t do a HUD home loan to buy a HUD home for sale.
2) You can’t have a full inspection on the house you want to buy before making a bid: You have to have a signed accepted contract from the HUD before you can have the utilities turn on. Just for info, the HUD houses for sale are sold in ‘as is’ condition, means that the HUD will not do any repairs on it. The HUD will provide a Property Condition Report (a report similar to a home inspection) on some of HUD home listings but not all. But, you can have a full inspection done after you have an accepted contract.
3) Earnest Money Requirements: The earnest money required differs for different price of HUD homes for sale. If the HUD homes for sale in the HUD home listing are over $50,000, the earnest money requirements are $1,000. But if it is under $50,000 the earnest money requirements are $500. The earnest money has to be in the form of cashier check, money order, or official bank check. If you choose you don’t want the HUD home listing, you can’t have your earnest money automatically.
4) Real Estate Professional: You will need a real estate agent to help you make bids. Since the bidding process is done on the internet by approved real estate agent, you need to find a trustworthy and experienced real estate agent to buy HUD homes for sale. Inexperienced agent may cost you thousands of dollars in mistakes, so carefully pick your agent.
Even though you may have seen the HUD home you want, see the price and is ok with it, and believe in the real estate professional you’re hiring to help you make the bid, you still have to learn the method and do the necessary research and learn the downsides of buying HUD homes for sale. So take your steps carefully. Excellent luck!
Read also: FHA Mortgage Loan and FHA Refinancing
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