First-time buyers often hear about HUD homes, and ask me how to get them. Why do they get all excited about HUD homes? Because they've been told that they can get them at a discount. So here's the low down on HUD home - what they are and where to find them.
Who are HUD?
In a nutshell, they are a government organization who wants Americans to be homeowners.
- Increase homeownership opportunities
- Promote decent affordable housing
- Strengthen communities
- Ensure equal opportunity housing
- Promote high standards of ethics, management and accountability
- Promote participation of faith-based and community organizations
What's a HUD Home?
HUD homes are homes that have been foreclosed upon. There is a great deal of confusing information out there, and the key thing to remember is that in Texas at least, a home cannot be sold without the consent of the owner of record (if they are of sound mind) before the home has been foreclosed upon. If the loan used to buy the home foreclosed upon was an FHA loan, then at the point of foreclosure, HUD takes back the home. It is then sold through an asset manager who ensures it is vacant. In the case of the Greater Austin Area (Leander, Round Rock, Austin, etc.) this asset manager is Southwest Alliance. The asset manager is responsible for getting the home into a known condition and then marketing and selling the home via an auction process.
What's in it for Me?
HUD is not in the business of owning vacant homes, they want to promote home ownership. This means that a buyer who is qualified for an FHA loan can purchase a home for below market rate. Austin HUD Homes are put on the market through a Realtor® in addition to the asset managers site, and buyers have 10 days to preview them with a Realtor® who is qualified to put in bids on their behalf. At this point, daily bidding commences, and each day the Realtors® are told of the status of their bids. The rules are a little different for investors, but this is the story for owner-occupiers.
Another advantage of a HUD home, aside from the potential discount over market rate homes, is that they have already been appraised, saving the cost of an FHA appraisal for the buyer. They are vacant, they are ready to be sold, and they will accept the best offer that is above the amount that they need to net. There are no emotional sellers unwilling to part with their home, no dealing with incumbant tenants, and the process can be painful with a Realtor® experienced with the process.
How Do I Find a HUD Home?
The first thing you need to do is contact a lender and figure out your prospective loan amount - I have lenders whom I work with that can turn this around very quickly and painlessly. Then you can either contact a Realtor® and have them set up a search for you and tell you of available properties, or search on SouthwestAlliance.com under Home Buyers - Property Listings. Then contact an approved Realtor® to go check it out and get them to put in an electronic bid for you. You can't put in a bid yourself - there are many steps to the process, so HUD has required that you be represented by a Realtor®. Once your bid is accepted, you go through a process of qualification and inspection and you can get the keys to your discounted home!
Garreth Wilcock is a Realtor® in Austin, Texas who is approved to help buyers search for and buy HUD homes. Contact him today to find out if a HUD home is right for you.