Buying Foreclosures and HUDs

HUD Homes

  A HUD Home is a property that was purchased using an FHA ( Federal Housing Administration guaranteed) loan, which went into default and was then foreclosed on.

  Anyone can buy a HUD home, but priority is given to owner occupant buyers, if no prospective owner occupant buys the property, investors are then allowed to buy.

  The HUD Home list is updated on every Friday morning. Homes remain on the list for review and consideration for ten days, on the tenth day at midnight (a Sunday), bidding closes, on the following business day, all bids are reviewed and the winner is notified by email and phone.   The HUD Home List is update on several days per week so buyers should check it often. The number of days for consideration and review vary from property to property, the winner is usually notified one business day after bidding has closed.

  In order to buy a HUD Home you must locate a HUD certified Realtor who will then place a bid online on your behalf. Stephanie Zellous is A HUD Certified Realtor®.Austin Area HUD Homes

  Before your Realtor can place your bid, you must submit a deposit, the amount is as follows: Property price $50,000 or less, $500 deposit, $50,001 or more, $1000 deposit. This must be in certified funds (money order, cashiers check), made out to US Dept. Of HUD. And you will need a pre-qualification letter from your lender containing your approval amount and the property address.

  If you win the property your Realtor will need to submit the signed purchase contract, your pre-approval letter and a copy of the deposit check to Southwest Alliance’s offices right away, failing to do so will result in your losing the property to the back up bidder.

  If you chose to get a home inspection, you get fifteen days which begins when your Realtor gets the certified contract from Southwest Alliance. Keep in mind that HUD does not make repairs or give credits for repairs, but instead they escrow money that buyers would need to make repairs themselves. Escrow with HUD homes means that they have specified the amount of money that it would take to make repairs, so you will be allowed to borrow that amount in addition to you home purchase loan. HUD has all of it’s properties inspected prior to listing them for sale, and the price reflects necessary repairs. HUD does not pay for the title policy or the home warranty.

  Once the contract has been reviewed and certified, your Realtor will mail or hand deliver the check and purchase contract to HUD’s certified title company in San Antonio. You don’t have to go to San Antonio to close on the property, as HUD will set an appointment for you in your area.

                                                                      VA Homes

  VA (Veteran’s Affairs) homes were purchased using a VA loan (Veterans Affairs Guaranteed loan) that went into default and then foreclosure. Anyone can buy a VA home, but priority is given to veterans.

  Once VA Homes come on the market, a bidding deadline of about three weeks begins. When you decide to buy the home, your Realtor will prepare a VA purchase agreement, you will sign, and submit earnest money of at least $500 in certified funds, you can submit larger amount of earnest money if you choose.

   CB033581 The time it takes to get an answer can vary; I’ve seen anywhere from two days to two weeks. But when you do get an answer the the Realtor in charge of the listing will call your Realtor, and escrow begins.

  VA does not usually allow property inspections, but if you do decide to get one your Realtor will have to help you get permission. Keep in mind that the VA does not make repairs or give credits for repairs.

  A unique benefit of buying a VA Home is Vendee Financing. When you place a bid on the property you can simultaneously apply for this financing, your bid is reviewed as usual, but if you win the bid, VA will hold the property for you while they review your loan application. Great deal huh?! You don’t even have to be a veteran or live on the property (investor tip) to apply! Credit is NOT a deciding factor! However some additional fees do apply, so if you have the cash, but not the credit this is for you.

 

 Click here for information about VA Vendee Financing.

                                                                   Bank Foreclosures

Regular bank foreclosures were purchased using conventional loans that were not guaranteed by FHA or VA. Anyone, including investors, can purchase a Bank Foreclosure home. The process for purchasing these homes is almost identical to that of purchasing a normal resale home, except there is usually extra paperwork that buyers have to sign.

The process is almost identical, here are the differences:

  1. Banks usually take a week to respond to your offer, regular sellers usually take about a day.
  2. Banks are not usually willing to pay for buyers’ closing costs, anything can happen and you may get lucky, but don’t expect it to happen.
  3. Banks are not willing to pay for a home warranty. Properties are sold as is, so banks are not willing to warrant the property.
  4. Banks are not willing to pay for the survey. This typically is a buyer’s expense, but some have gotten the seller the pay.
  5. Banks are willing to pay for the title policy.

                                                                         Short Sales

A short sale is a home seller renegotiating the loan balance with the mortgage bank who owns the property. By accepting less than they are owed, the bank is agreeing to come up short, hence short sale.

Who does a short sale benefit? Everyone, although the bank tends to disagree. If the bank chooses to foreclose on the property, it could cost considerably more than the losses that would occur with the short sale. j0398817 You, the home buyer, could benefit by getting a great deal on a home that you otherwise may not have been able to afford.

It is very important to get pre-approved for a mortgage loan before attempting to buy a short sale property. Even though the bank may take several weeks to respond to your offer, once they do respond they expect you to close ASAP, a loan pre-approval, versus a pre-qualification, will allow you to do that, because all of the necessary paperwork has already been submitted to your lender and the bank is just waiting for a closing. Whoever can close the fastest is typically who will get the property, so a cash buyer could get the property even if they offered less, as they can close faster than mortgage lender can.