The U.S. Department of Housing and Urban Development still owns great homes which are a great opportunity for home buyers. Visit www.HudHomeStore.com for the direct listings of all the HUD homes for sale. Here are some tips from me having sold over 125 HUD homes:
1. HUD gives "owner occupant" buyers the first opportunity to submit offers. Therefore, you are not competing against investors with "all cash" and no contingencies.
2. HUD accepts the highest net offer regardless of the type of the buyer's financing. For instance, a zero down buyer can outbid a cash buyer by $1 and win the bid.
3. HUD does not evaluate bids based on typical terms such as close date, financing contingency, inspection contingency, and EARNEST MONEY amount. The only criteria for bid acceptance is highest net offer to HUD. The net offer is purchase price, less any seller paid closing costs requested.
4. HUD allows a 15 day inspection period but sells it's homes firmly "as-is". Therefore, owner occupants may inspect the home to their satisfaction but no negotiating is allowed. Owner occupants may cancel after their inspection or continue with the sale.
5. The terms and conditions of a HUD home are not negotiated. The closing date is typically 45 days, the earnest money is typically $1,000, and the inspection period is 15 days. HUD evaluates bids only by the net price to the seller. Otherwise, all bidders are on the same page.
6. HUD lists their homes in terms of FHA financing. When you see "Insurable" in the listing, it refers to FHA Insured Loan Status. Roughly 80% of HUD homes in WA are listed as FHA Insurable. Hence, these homes qualify for FHA loans at 3.5% down. Some homes are Uninsured for FHA loans and are eligible for investors to bid on the 6th day instead of the 15th day on homes that qualify for FHA loans. If the home needs repairs under $5,000 to bring it up to FHA loan status, an FHA 203b loan with escrow repair may be used to repair the loan after closing. These repair costs are added to the buyers FHA loan and distributed to the buyer after closing for the required repairs.
7. Many HUD home buyers may utilize a REHAB loan or FHA Rehabilitation Loan (FHA 203k) to repair and improve the home after closing. FHA allows the buyer to add money to the loan form improvements up to the buyer's qualification limits and/or improved appraised value and the FHA loan limits. In the Seattle area, buyers can improve most homes with an FHA 203k loan up to over a $400,000 loan. Use the FHA 203k to redo the kitchen, roof, bathroom, flooring and septic.
8. HUD homes may also qualify for VA or Conventional financing however viewing the DISCLOSURES document on HUDhomestore.com will help clarify what repairs, if any, are required for FHA loans and repairs should be evaluated for other financing eligibility since no repairs can be completed prior to close.