HUD Homes
Interested in buying a HUD home? What is it? A HUD home is one that was previously financed using an FHA loan and then subsequently foreclosed upon. The process by which a buyer purchases a HUD property is a very controlled single-blind-bid process with preferences given to first time home buyers, teachers, policemen and fire fighters. The potential equity gain from a HUD purchase is tremendous and unlike buying other foreclosures where the process differs greatly from bank to bank, the HUD process is very structured and designed to protect the consumer. I'm a certified HUD broker with the experience needed to find the right opportunity for you. Click on the following link to view available homes and ask me about special programs available for teachers, policemen & fire fighters.
Why is a HUD Home GREAT for a 1st Time Buyer or someone wanting a "NEW" look???
The single-word answer is "203(k)". Here's what I'm talking about: Many people are averse to buying a HUD foreclosure because often the homes are missing carpet, appliances, and may even have holes punched in the walls. Through the 203(k) Streamline program, qualifying homes (most qualify) allow the buyer to receive a home improvement loan for as much as $35,000 to spend on improvements, including brand new appliances of their choice, and then add the amount of the home improvement loan to the mortgage. This allows the home buyer to take care of all the problems up front and yet put the entire expense into the 30 year mortgage. Where else can you get a 30 year loan for a set of brand new appliances at mortgage interest rates!!! To make it even better, when all repairs are completed, the buyer has a great home more often than not well under market value. Click here to learn more about 203(k) Streamline loans.
Bidding Process
What exactly is the HUD bidding process? When a HUD foreclosure first "goes to market" it is only available for purchase by qualifying owner-occupants for the first 10 days. At the end of that period the best owner-occupant bid that meets HUD's minimum net requirement is awarded a 45 day opportunity to purchase the home. If the home does not sell within the 1st 10 days then the sale will open up to investors. One exception to this process are qualifying homes that reside in HUD designated revitalization areas. Prior to being available to owner-occupants these homes are first enrolled in the "Good Neighbor Next Door" (GNND) program where they are available for a 5 day period of time to teachers, policemen and firefighters. The primary benefit of the GNND program is to reward the buyer after 3 years of ownership with the "forgiving" of a "ghost" mortgage equal to 1/2 of the original purchase price. For example, if the home was purchased for $100,000, there would actually be 2 mortgages, a $50,000 "normal" note combined with a $50,000 ghost mortgage. After a certain number of years, currently 3, the ghost mortgage goes away and the homeowner only owes $50,000 less any other principle that was paid down. I know of nowhere else that a buyer can count on that type of equity gain after only 3 years of ownership. S
Short Sales
I also specialize in short sales . In the market today many new and seasoned homes buyers are looking for that good deal. Many times a short sale, where you are purchasing a home before it goes into foreclosure, is a better way to go. Sometimes a home will sit vacant for many months before it goes to sale in a foreclosure situation. In that time many bad things can happen to a vacant home which is another added benefit of the short sale process.
Buyers who want a good deal in real estate invariably think first about pursuing foreclosures. Investors who specialize in buying foreclosures often prefer to purchase these homes before the foreclosure proceedings are final. Buying a property in pre-foreclosure (short sale) involves approaching the borrower/owner and offering to buy the property outright. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history.
What is a short sale?
A short sale is a sales transaction in which the seller's mortgage lender agrees to accept a payoff of less than the balance due on the loan. A short sale may or may not involve a property in foreclosure. The net gain for the seller typically is less of a credit “hit” due to foreclosure avoidance. The net cost to a seller is that the amount of the write-off or difference between the sales price and the payoff amount is usually taxable income in the form of a 1099.
Why Are Short Sales So Troublesome?
Short sales seem like a win-win for everyone involved, but as real estate professionals know, short sales can be hard to pull off. It can take months for the mortgage company to respond to an offer, and the lender or lenders often balk at the price.
Why doesn’t the process go more smoothly when it seems like a much better deal for everyone than foreclosure?
* Paperwork. Gathering all the information needed to evaluate a short-sale offer can take time. The loan servicer must first determine whether the homeowner really can't continue meeting the loan payments, then get an appraisal or broker's opinion of the home's value.
* Many steps, approvals. Mortgage servicers also try to ensure that the proposed sale is an "arm's length" transaction between two parties rather than something like a sale to a relative on sweet terms. They must also determine whether the buyer has sufficient funds or the ability to get a loan. If all those hurdles are cleared, the servicer may still need to get approval from the investor that owns the loan and provide an analysis showing that the investor will be better off with a short sale than with another solution.
* Complications often arise. There are additional complications if the borrower has a mortgage and a home-equity loan. In that case, both parties must approve the deal – which is a challenge when the sales price may not even be enough to cover the mortgage balance. * Minimize delays. Home owners contemplating a short sale immediately should call the loan servicer to get the approval process started, rather than wait for an offer.
More Banks Consider Short Sales
After about a year of dealing slowly and reluctantly with short sale offers, many banks are reconsidering, looking for solutions that will allow them to recoup debt in foreclosure situations.
Observers say that if the trend continues, it will reduce or eliminate the need for taxpayer bailouts
The National Short Sale Center, which helps short buyers negotiate with banks, says three-quarters of its short offers are approved now, up from maybe half six months ago.
Lenders Stall Short Sales, Practitioners Say
Real estate practitioners across the country believe mortgage lenders are worsening the housing downturn by taking months to make decisions on short sales and sticking to high internal target prices.
As a result, home buyers are abandoning short sale properties, forcing them to be sold in foreclosure sales that typically result in lenders accepting lower prices than they could have achieved in a short sale.
Some practitioners contend that lenders lack the appropriate systems and staff to handle short sale requests, while lenders insist the short sale process is complicated by the need for approvals from investors and mortgage insurers.
Still, practitioners note that a more efficient short sale process would boost prices and reduce inventory.
Why Do Sellers Go Into Foreclosure?
Sellers stop making payments for a host of reasons. Known as “distressed sellers”, these homeowners may suffer from situations such as:
* Laid-off, fired or quit job
* Inability to continue working due to medical conditions
* Excessive debt and mounting bill obligations
* Squabbles with co-owner, divorce
* Job transfer to another state
Check with your local county office to find out how sales in your area are handled, but common threads among most of them are:
* No loan contingency
* Sealed bids
* Proof of financial qualifications
* Sizeable earnest money deposits
* Purchase property "as is"
Sometimes buyers are not allowed to inspect the house before making an offer. The problem with buying a house sight unseen is you can't calculate how much it will cost to improve the structure or bring it up to habitable standards. Nor do you know if the occupant will damage the interior. On top of that, you may need to evict the tenant or owner from the premises after you receive title, and eviction processes can be costly.
Auction:
If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.
Bank-owned (REO):
If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will then typically clear the title and perform needed maintenance and repair; however, the potential bargain for these REO homes is typically less than a pre-foreclosure or auction property.
Before you buy
You'll need to make sure you're armed with the foreclosure data you'll need to find and buy foreclosed homes. You can start by searching a foreclosure listings database, which includes pre-foreclosure and auction properties across the country and a nationwide bank foreclosures list.
Give us a call to find out more! Phyl 704-243-5039 or Kelly 704-743-8743 or fill out the form below.
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