Buying a HUD home.

People in the market for a home may find that they can get quite a deal if they take their time and look for foreclosures or short sales. We've all heard stories about how somebody was able to buy into a great neighborhood at a bargain price. While these opportunities have always existed, they have not always been easy to find. Typically, the houses in the better neighborhoods go for more than the asking price due to multiple bidders. Even so, the winning bid is usually below market value. If the house isn't in too bad of shape and the new owners have at least a rudimentary understanding of basic carpentry, the story can have a positive conclusion.

A short sale is a home that has gotten approval from the lending institution to be listed for less than the current homeowner owes on the property. They have become quite common as the value of many homes have dropped. A foreclosure is a bank owned property for sale by the bank who foreclosed on the loan. A HUD home is a house that was insured by FHA, which means that the government takes the loss rather than the bank. These are the homes that end up on the HUD sales sites. The bank foreclosures are available and can be seen by contacting the bank who has listed the house in question. In this hub, I'll be addressing the HUD home, because that's the type of foreclosure I bought.

There are two basic ways to bid on a HUD home. One is as an investor, or someone who plans to either keep the house for rental income, or fix it up and quickly sell it at a profit. The later is known as "flipping", and has been popularized in cable television reality shows. The other way is as an owner occupant, and simply means that the bidder intends to keep the house as a full-time residence. Usually, when a new HUD home goes on the market, it is only available to owner occupant bidders. After a period of time passes with no bids accepted, the listing will be modified to allow investor's bids as well as owner occupants. There is a separate category for listings open only to government agencies, but those don't concern the average buyer. One way to get a great price is to bid on a property open to all bidders as an owner occupant. Buyers who intend to live in the home are given preference. That's how I got such a good deal on my own HUD home.

Accessing the HUD listings is easy and really fun. You get to see all the homes in your selected area that are available to bid on, and you can call a real estate agent so that you can see some for yourself. Not all agents are able to show you HUD homes so you will want to make sure that their brokerage has the authority to submit a bid. Bids are submitted online, usually at the brokerage where your real estate agent holds their license. You have 24 hours to wait and see if your bid is accepted. They don't notify you. You have to check the website to see if they took your offer. If they didn't, the house will still show as available. If your bid was taken, it will show as no longer available, along with the information of the brokerage that submitted the accepted offer. At that time, you will have to fill out some standard paperwork, and will probably have to put up some earnest money. The amount of the earnest money will vary accordant with the amount of the sale price. Shortly after, you will be given a closing date. This will usually be about 60 days out from the date you signed your papers and should give you ample time to secure financing and make any moving arrangements, or plan for repairs on your new home.

In many ways, buying a HUD home is just like buying any other house, except that the majority of HUD homes are in need of at least some repairs. If you are handy, you can get a good price on your house and do most of the work yourself. If you get a very good price because the house needs major repairs, you may find that even after you pay the contractors, you will still come out ahead financially. When I add the cost of the repairs and purchase price of my home together, and compare them to what I could get in this economy if I sold the house, I would still be about $40,000 ahead. That is with taking 20% off the highest sales price of the house to adjust for the poor real estate market, and also factoring in that the improvements that were made. That is to say, that the updates I completed made the house even nicer than it was at the time of its peak value. I think that is a good worst case scenario idea of what I could hope to get if I chose to sell. Keep in mind that if you buy as an owner occupant, you will need to stay in the home for at least a year before you sell or rent, and you are only permitted to buy another HUD home as an owner occupant after owning your current home for two years.

I have always wanted a home on a wooded lot with a deck in back, and I was able to find that in my price range because I bought a HUD home. I have almost an acre, with plenty of room for my kids and pets to play, and I can relax on my deck in the evening with a glass of wine and look out on only trees and sky. The process took time and effort, but I learned a lot and I have no regrets. I like to think that the spirit of my little house is glad to be well cared for by a family once again. I know it's a silly notion, but it makes me proud to see the difference that a lot of hard work and determination have made.