HUD (US Department of Housing and Urban Development):
The largest number of government foreclosures can be found through HUD. HUD is a federal agency that implements housing policy and was created to increase homeownership across America.
Buying a HUD Home is Different than Buying Other Types of Homes
The procedures for pursuing a HUD home purchase are different than those used in buying other types of residential homes. HUD has made the procedure efficient and convenient.
Who can buy a HUD home?
HUD homes can be purchased by anyone. Homes may be purchased by owner-occupants (who have a priority bid period for 10 days), and by investors, who can then bid along with owner occupants. While many HUD homes are considered to be more affordable.
HUD homes are sold at market value.
HUD homes are initially priced for sale at the appraised market value. The buyer may offer any price, but HUD will only agree to offers that provide an acceptable return. Price reductions may take place later if the home does not sell.
Homes offered by HUD are sold "As Is".
It is important to understand that HUD homes are sold in "as is" condition. This means that the condition of the home when you see it is what you will be buying. HUD makes no warranties, does not guarantee the condition of any home, and does not verify that it complies with any local code or zoning requirements. You must make any necessary repairs after the purchase. HUD may make, or give you an allowance for, major system or safety repairs only if you are purchasing with an FHA-insured loan. It is very important that you get a Home Inspection by a licensed professional prior to closing on the sale.
Time limits are important and deadlines must be met.
Generally when you purchase another type of home, you can usually negotiate items within the contract over a period of time. When purchasing a HUD home, this is not possible. In order to be fair to all purchasers, HUD has imposed timetables that must be met or your bid or contract will be cancelled and the home returned to the market. Once your bid is acknowledged as the highest net to HUD, for example, your agent must send in a correct contract within 48 hours or the bid will be cancelled. Generally, closing must take place within 45-60 days.
How to find a HUD home.
As you search this website under 'available homes', you may find homes that have been identified as HUD homes. However, for a complete list in your area, request more information from a Real Estate One associate.
How to make an Offer on a HUD Home
All offers must be submitted by your broker through an electronic bidding process via the computer through the Internet. The electronic bids are stored in the computer system and, at the appropriate time, calculations are automatically performed to determine the apparent highest net offer to HUD.
After acknowledging the seemingly highest bid, HUD will notify the broker to send in a correct, signed sales contract within 48 hours of acceptance. If the contract is not received within 48 hours or is incorrect, the home will be returned to the market or acknowledged to the next highest bidder.
Initial Listing Period
The initial listing period, which is generally the first public listing for HUD homes, is 45 days. During this time, priority is given to owner-occupants who are buying the home as their primary residence. Priority is given for the first ten calendar days as follows:
All owner occupant offers received during the first five days of this initial period are considered to be received simultaneously. On the first business day after this period, these bids are reviewed to determine the highest acceptable offer to HUD.
If there is no acceptable bid, bids are reviewed on a daily basis for the remaining five days. Bids received at different times during the day will be considered received simultaneously, and the highest acceptable net bid will be acknowledged on the date opened. If the property remains unsold after ten days, it is made available to investors as well, and bids are reviewed on a daily basis. (Investor bids may be placed at any time but are not reviewed until the 11th day, if the property is still listed.)
An owner-occupant purchaser is defined as a purchaser who intends to use the property as his or her principal residence; a State, governmental entity, tribe, or agency thereof; or a private nonprofit organization. Governmental entities include those with general governmental powers (e.g., a city or county), as well as those with limited or special powers (e.g., public housing agencies).
Subsequent Listing Period
After the initial 45-day listing period, the subsequent listing period begins and runs for 90 days. During this time, properties are available to owner-occupants and investors. Bids are reviewed on a daily basis; bids received at different times during the day will be considered received simultaneously, and the highest acceptable bid will be acknowledged on the date opened. Price reductions may be made during this period. If the property remains unsold, it will continue to be listed.
Contract must be submitted within 48 hours
If your bid is acknowledged, your broker must submit a correct HUD Sales Contract, along with other required forms and Addendums signed by you, to HUD office within 48 hours. You may be required to submit proof of financing commitment or cash to close, along with other items. You should be working with your broker to put the required items in place before you bid on a home, so that you are ready when the time comes.
Closing on a HUD Home
Closings are generally within 45-60 days and held at the closing agent office. After your contract has been received correctly, it will be signed by HUD’s representative on behalf of HUD and returned to your agent along with a contract acceptance letter. The letter will give you up to 60 days to close. Once you are ready to close, you and your agent must schedule the date with the closing agent indicated on the letter, who also receives a copy of your contract. HUD’s representative does not set the closing date; it is up to you.
If you use the HUD closing agent, HUD pays their fees. You may use your own closing company, but then you must pay the fees. If you use your own closing company, they must work with the HUD agent on some legal items.
HUD will pay some closing and sales commission costs
Generally, HUD will pay up to a certain percentage of a broker's commission cost. In addition, HUD will pay up to a percentage for standard closing cost items (excluding the closing agent fee which is paid for separately). These items are designated by the buyer and may include discount points, loan fees, title costs, surveys, and other items. HUD will also generally pay any outstanding seller costs such as outstanding tax or utility bills which relate to HUD's ownership. You agent will know commission fees for your area.
Return of Earnest Money
There are specific requirements for earnest money deposits when purchasing a HUD property. When you submit a contract, you must deposit earnest money with your agent, usually in an amount of $500 or $1,000. If you know your transaction will not close, your agent must notify the management company as soon as possible so the home can be returned to the market. You may have to forfeit all or part of the earnest money if the sale does not close. If the sale is to an owner-occupant and does not close due to circumstances beyond their control, the money may be returned. Please review the earnest money policy for your area with your broker before you place a bid on a home.
Time Extensions
There are certain circumstances that may allow an extension of time. Extensions for time to close may be granted, in 15-day increments, under certain circumstances. Extensions may be granted at no cost to owner-occupants under certain circumstances that are beyond their control, such as a delay in financing approval that is not due to the buyer. Extension fees may be charged under other circumstances, and for investors. Extension requests must be submitted to the closing agent (not HUD) in writing prior to the expiration of the original closing date, and accompanied by a non-refundable fee, in certified funds, if a fee is required. Contact your closing agent for more information on this process.
Check out this video of HUD Homes now available in Michigan. These homes are featured in our Full color, full page Detroit Free Press ad this Sunday too!
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