With the economic times being what they are, you see TV commercials about buying foreclosed and real estate owned homes (REOs). But, did you know that there is another way you can buy a reasonably priced home? And, you can get a FHA loan to buy it. That's something you typically can't do with foreclosures and REOs.
Many people are unaware of homes sold by the U.S. Department of Housing and Urban Development (HUD). HUD owns and sells houses that are single family homes and up to four unit properties that can be used as income rentals, usually as long as the owner resides at the property. These are homes previously owned by people with FHA loans that were foreclosed on by the Federal Housing Administration (FHA). FHA is part of HUD, which is why homes that revert back to FHA are called “HUD homes”.
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HUD and the FHA work together to guarantee loans for people in order to have easier accessibility for becoming homeowners. Although HUD owns these homes as a result of FHA loan foreclosures, you can still get a FHA loan to purchase a HUD home as long as you have never defaulted on an FHA loan.
HUD homes are not advertised on your local realtor's multiple listing service (MLS), like foreclosures and REOs. HUD homes are sold through listing agencies that can be accessed through the HUD website. Click on the state in which you are interested in buying the home. The listing agent websites for each state are different, so be sure to follow the instructions on that particular website for finding a list of HUD owned homes.
Another way buying a HUD home is different than buying a house from a conventional realtor is that you must work with a HUD registered real estate broker. The broker puts the bid on the home you're interested in buying. If the bid is accepted, HUD pays the real estate broker's commission. Like other foreclosures, HUD homes are sold as-is with no warranties. You are responsible for getting the home inspected and identifying any problems with the home and surrounding property.
If you find a problem, but are still interested in bidding on the home, be sure to include a copy of the home inspection along with your bid that is changed according to the necessary repairs needed on the house. This way HUD can see that there are repairs that need to be done to the home and will take this into consideration when deciding whether to accept or reject your offer.
