What is a HUD Home?
If a loan that is insured by the Federal Housing Administration (FHA) goes into default, the lender takes steps to collect on the loan. This may result in the lender taking possession of the property. If this occurs, the lender may submit a claim against FHA's insurance fund and convey ownership of the property to HUD. HUD, in turn sells the property as quickly as possible at market value.
Who can sell HUD Repos?
Any broker who is registered with HUD may have their agents place a bid on a HUD REO electronically on behalf of the purchaser.
Who can buy a HUD Repo?
Any buyer that can secure a loan to purchase real estate or can pay cash is eligible to purdhase a HUD Home. Purchasers must use a broker or agent who is registered with HUD to submit a bid on a property. Purchasers must also have a pre-qualification letter from a lender or proof of cash funds in the amount of, or greater than the property they are purchasing.
Important Program Highlights:
- HUD has an "As Is Policy"
- There are 3 different financing categories for HUD Homes:
- 1 - IN - Insurable 203(b) Properties listed as IN appear to qualify for FHA 203(b) financing. There should not be any MPR repairs necessary
- 2 - IE - Insurable with Escrow 203(b) Repair Escrow - Properties listed IE are eligible for FHA financing with repairs to be completed by the purchaser after the close of escrow. These repairs must be Minimum Property Requirements (MPR) or repairs totaling less than $5,000. MPR categories include; roof, structural and mechanical systems, such as plumbing, electrical and heating. Cost of repairs is not paid by HUD; however, the buyer may finance the repair escrow amount in their mortgage. Repair escrow only applies to FHA Financing, NOT cash or conventional financing.
- 3 - UI - Un-insurable Conventional, Cash or 203(k) Properties listed UI generally are in need of extensive repairs and are usually purchased with cash or conventional financing. The only type of FHA financing is a rehabilitation loan for owner occupants purchasing properties that have over $5,000 dollars worth of MPR repairs. Not all UI properties will qualify for FHA 203(k) financing.
- Only One Owner Occupant bid at a time
- Investor Bids are not accepted until at least 10 days after the property was listed. This gives Owner Occupied Purchasers first opportunity to buy the home. (Note: They will also allow five additional days after a price reduction)
- HUD waives down payment requirement on HUD REOs. Buyer only has to come to table with $100.