What are the advantages of buying a HUD Foreclosed Home?

A lot has changed in real estate and mortgage finance in the past two years. But don’t just take my word for it; pick up the Saturday paper in your hometown and notice the significantly fewer display ads for Real Estate and Mortgage Brokers . And if that doesn’t have you convinced then count the number of For Sale signs that seem about as ubiquitous in some areas as the foreclosure notices published in the paper.

During this same time more than 300 major US mortgage lenders have shuttered their doors, filed for bankruptcy or both. This was due largely in part to a false belief that house prices always rise in value and insatiable appetite on Wall Street during the past decade for Mortgage Backed Securities which has all but stopped entirely. The American homeowner has rediscovered that home prices don’t always rise and sometimes they (gasp) decline!

This time of easy credit and cheap money spurred an unprecedented building boom in which regional and national home builders flooded markets with record numbers of new housing units. Many of these targeted a lower end consumer or what is commonly referred to as the First Time Home Buyer. Because FTHB tend to be less educated in what a quality home is and their need for housing is greater than their need for quality housing a builder could substitute quantity for quality and thus boost profits. As a result you see larger cheaply built homes. Because a FTHB’s do not need to sell a home before they buy another they are generally fast closers and in when it comes to selling a home, time is money. Finally because FTHB’s need for housing generally has nothing to do with economic conditions and so they tend to buy in all types of economic conditions.

Some of these homes were financed using Federal Housing Agency loans which are insured by te Housing and Urban Development. Because of the above mentioned market conditions, HUD is now faced with the same problem any other seller is faced with; increased competition with fewer buyers. As a result for the first time in my career which spans more than a decade and possibly in history HUD and other banks are actually making repairs to the properties they own in order to make them more appealing to buyers who like them are strapped for cash. In the case of a HUD owned home the cost to cure any property deficiency is being identified by HUD before the bidding process begins. HUD has already determined the cost to cure and has agreed in the minimum bid price to escrow the cost of those repairs plus a 10% contingency. So as you can see, concern about property condition is a moot point because the seller has already agreed to pay for the cost to repair + 10%!

For homes that are habitable but need to be updated, a streamlined 203(k) could be the perfect solution. A streamlined 203(k) loan allows you to purchase a home and make up to $35,000 in eligible post closing repairs or cosmetic only improvements. Eligible improvements are floor covering, paint, cabinets, countertops, roofs, siding, windows, doors, landscape, and mechanical like HVAC and water heaters.

What makes a HUD home most attractive in my opinion is that they are generally offered at least a 20% discount from market value. To make it safe and habitable HUD will pay for required repairs . HUD will pay up to 3% in the buyers closing costs and for qualified applicants; the homes can be purchased and financed with only $100 down!

To search local HUD Foreclosed homes and Homes for Sale By Owner in the greater Raleigh area; Raleigh Area Real Estate For Sale by Owner-North Carolina

Ricardo Cobos is a mortgage banker with 11 years of experience working with First Time Home Buyers and works with National City Bank, one of the top five mortgage lenders in the country. For 24 hour free recorded information (888) 440-3948 ext 132