What is a….
The previous owners were unable to make their payments for one reason or another. HUD homes were originally financed using an FHA loan which was a government backed instrument.
Like all homes, the seller is concerned about the bottom line. The seller’s goal is to make as much money as possible. Therefore, when considering an offer, your broker will counsel you as to the best course to make your offer as attractive to HUD as possible.
Some HUD homes cannot be re-financed by FHA due to the condition. FHA requires that the floors have no holes, there are bathroom and kitchen fixtures, and if the was built prior to 1978, there can be no peeling paint due to lead issues. The house must be in livable condition.
A HUD bid for a home is placed over the internet and results are posted approximately 24 hours after the bid process closes. The overall bid placement is very simple and the buyer knows very quickly whether or not he/she was successful.
When a home goes up for sale, there is an offer deadline. This deadline is for those buyers who will occupy the home as a principle residence. If there are no accepted offers by the deadline, the home is available to investors as well.
The buyer has the right to do an inspection. However, HUD, as a general rule of thumb, will not repair anything. But, the buyer may cancel the contract due to inspection issues, and the earnest money will be returned to the buyer.
Before the home goes on the market, the seller has an inspection done. Some homes may require replacement of a furnace, roof, etc., in which case, HUD will escrow the funds for the buyer. That means that once the buyer has replaced the damaged item, the funds will be released to pay for the repair.
Should a buyer wish to offer more than what the appraised value is for the home (appraised value is found on the HUD website), the buyer must bring the difference between the accepted offer amount and the appraised amount to closing. Therefore, if the home is appraised at $100,000 and the buyer has offered $105,000, the buyer will have to have the additional $5000 as well as the down payment and closing costs.
FORECLOSURE OR BANK OWNED HOME?
Foreclosures and bank owned homes are the same. Many buyers do not understand the difference, there is none!
Once a home has gone to “sale” with the Public Trustee it goes up for public sale. Generally, the highest bidder is the bank, the first position lien holder. This property now becomes “bank owned”.
Banks generally need 5-10 days to respond to an offer. They may accept the offer as written, reject it, or counter it. The counter may only be to add the bank addendums to the contract and clarify the dates for specific items to be performed.
Some banks will help the seller with closing costs, some won’t.
All bank properties are sold “As-Is”. They have winterized the property (turned off the water) and it is the buyer’s responsibility to have the water turned on for the inspection. This is an additional charge, due before the inspection of around $150.00. This is non-refundable to the buyer.
The buyer has the right to do an inspection and submit the results to the bank. Unless there is a major issue, furnace doesn’t work, roof leaks, etc., the bank will not re-negotiate the purchase price, nor fix the damages.
The buyer may cancel the contract due to inspection issues, and the earnest money will be returned to the buyer.
A SHORT SALE is a sale transaction where the lending holding a mortgage on a property agrees to release its mortgage or deed of trust for less than the full amount owed by the homeowner.
The lender DOES NOT have to agree to the short sale. This is at the lender’s discretion.
The lender has its own time-frame, generally not very quickly.
The lender functions on its own rules and regulations, which may not be compatible with the seller’s or buyer’s expectations.
The process takes a very long time. As a general rule of thumb, it takes 2-3 months for each lien against the property to be successfully negotiated. There is a first, generally, a second, possibly a tax lien, a HOA lien, etc. Each one of these liens needs to be addressed separately, and as they are ALL owed money, they ALL want what is owed to them.
Once the contract has been accepted, the buyer has the right to do an inspection. Should the buyer decide not to go through with the purchase, the earnest money will be returned to the buyer.
THERE IS NO GUARANTEE THAT THE HOME WILL SELL. THE ONLY ONE IN CONTROL OF THE TRANSACTION IS THE LIEN HOLDER IN FIRST POSITION!