When homeowners use the Federal Housing Administration (FHA) to underwrite the mortgage on their home, they will get a mortgage similar to everyone else’s conventional mortgage with some limitations. So, even though they bought an FHA home, it doesn’t mean that they can’t end up in foreclosure.
When that happens, the FHA will pay off the lender, and then the home’s ownership is transferred to the Housing and Urban Development (HUD) program. These are called HUD foreclosure properties, real estate. To bid on HUD foreclosure properties, real estate, the process is much different than buying it at auction or in a preforclosure sale. There are some pros and cons when compared to other types of foreclosures.
Pros of HUD Foreclosure Properties, Real Estate
Unlike foreclosures on the regular market, you may not be able to see the inside of the home or do an inspection on it before it goes to auction. That’s some of the risk of buying at auction. With HUD Foreclosure Properties, real estate, you can get an appointment to tour the inside of the home with a local realtor and even order a home inspection if you are interested in bidding on the home.
HUD will also mark down the price of the home automatically, according the amount of repairs needed to bring the HUD foreclosure properties, real estate, up to market standard. So, you don’t have to try and negotiate downwards or bypass a house that is priced too high to recoup your investment. That is already factored in.
The bidding process may be a bit unfamiliar, but it’s not too complicated. You have to submit sealed bids to HUD. When they receive multiple bids on the home, they will automatically take the highest bid. If it doesn’t get enough bids during a specific period, they may wait a bit and accept bids after the initial period.
Cons of HUD Foreclosure Properties, Real Estate
Since the bidding process is different than an open auction, you have to be a bit more savvy about when a home you are interested in is going to be open for an “offer period.” If you miss the offer period, you might not get your bid in on time to be considered. You will want to look on the HUD website for HUD foreclosure properties, real estate, in the area you are interested in purchasing.
There are restrictions that keep out investors from buying HUD homes, like they can only be sold to those who intend to reside in the premises. They are not meant for speculation purposes, from the government’s point of view.