HUD homes can be a great opportunity for buyers who are looking to get a great deal in Greeley. HUD uses a much different system to sell their homes than most sellers and that can be intimidating to buyers and real estate agents. The HUD system can actually be very easy to use once you understand what is expected of you and how the buying process works. If you are looking to get a great deal on a home in Greeley I suggest you use a real estate agent who is very familiar with HUD homes. We have sold over 300 HUD homes in the last three years in the Greeley area and I want to go over some of the HUD Home basics in this article.
What are HUD homes?
HUD homes are homes that have gone through the foreclosure process and are now owned by the government. The reason the government owns them is the home was purchased with FHA financing. FHA financing is a federally insured financing program that allows home buyers to purchase homes with as little as 3.5% down. When the homes that are purchased with FHA go through foreclosure they end up in the possession of the government because of the FHA insurance.
Once the government takes possession of the home, the government will clean it up and sell it as a HUD home.
How can you find HUD Homes in Greeley?
HUD Homes are listed for sale on HUDHOMESTORE.COM when they are actively for sale. Actively for sale means they are not under contract and available to purchase. If a HUD Home has a bid accepted on it, HUD will take the home off of their website. HUD homes are also listed by local real estate agents like myself. All HUD homes are listed in the local MLS system which can be accessed by most real estate agents. Your real estate agent will be able to tell you if a HUD home is under contract or actively for sale by looking at the status of the HUD Home on MLS.
How can you bid on a HUD home in Greeley?
HUD homes are very easy to bid on, but all bids must be submitted by a HUD registered real estate agent. In order to be registered with HUD the agent’s office must have an NAID number, which can take weeks to obtain if a new number is needed. Our office has an NAID number and all of our agents can place bids on HUD homes.
All bids are placed online by the registered HUD real estate agent and no actual documentation is needed to be submitted with the bid. However, if your bid is accepted you will have 48 hours to overnight the HUD contract and all other documents to HUD. You must have a prequel letter or proof of funds letter as well as certified funds for earnest money. HUD will respond to bids placed in their system very quickly so you need to have all items ready to go once you place a bid on a HUD Home.
What kind of condition are HUD homes in?
Many people assume HUD homes are in horrible condition, because they are foreclosures. They truth is HUD homes come in all shapes and sized and can be in very good to very bad condition. Many HUD homes need some work, but many HUD homes are decent shape and ready to move into as well. HUD does an inspection and appraisal on each HUD home before is listed and that can give you an idea of what kind of condition the home is in before you view it or make a bid.
Do owner occupants have an advantage with HUD Homes?
Yes, HUD gives a clear advantage to owner occupants in their bidding system. On certain homes owner occupants have 15 days to bid on a home before investors can bid and on other homes they have a 5 day advantage over investors. The different type of home is determined by the HUD appraisal and based on how many repairs the home needs. I will talk much more about this in the next section.
Can you get financing on HUD Homes in Greeley?
Yes, financing is available on most HUD homes. HUD has a special system that allows FHA financing on HUD homes that have less than $5,000 in repairs needed to qualify for FHA loans. These homes are labeled as FHA insurable. These are also the homes that have a 15 day owner occupant only bid period. If the home requires repairs to go FHA the house is given a repair escrow. The repair escrow is added to the buyers’ loan, repairs are made after closing and the lender pays the contractor who performed the repairs directly. The FHA repair escrow can only be used on FHA loans.
If a home is considered to have more than $5,000 in repairs needed to meet FHA guidelines then the home is labeled as uninsurable. These homes cannot qualify for a regular FHA loan, but may qualify for a FHA 203k rehab loan. In a 203k rehab loan more than $5,000 in repairs can be made after closing by licensed contractors. The repair amount is added to the buyer’s loan and paid out directly by the lender. For homes that are uninsured the owner occupant only bid period is just 5 days and investors can bid on the 6th day.
You can also obtain conventional and many other types of financing on HUD homes. It is very important to know what your loan will require as far as condition of properties, because HUD does not make repairs.
What costs are associated with buying a HUD Home?
HUD homes do have a few more costs associated with them then a regular sale has. HUD will not pay for title insurance for a buyer, which can cost roughly $500 to $1,000. HUD will not pay for closing fees, which can cost roughly $150 to $400. HUD will not turn on utilities for inspections, which can cost the buyer $100 or more for utility turn on fees and usage fees. HUD does do an FHA appraisal on every home, so if you are getting an FHA loan you may not have to obtain a new appraisal, which can save you $400 to $500.
There are many different nuances with the HUD system and I did not come close to covering all of them in this article. I have another article I wrote that goes into much more detail for owner occupants and investors. As a buyer you do not have to know everything about HUD to buy a HUD home, but you need a great agent who is very familiar with the HUD system. Our team has sold over 300 HUD homes in the last three years in the Greeley area and we would love to help you purchase one as well. For much more detailed information on HUD homes please check out this article.
Please give us a call or (970) 573-6441 email us at [email protected] and we will be happy to help you.