HUD Owned Homes And Properties

HUD Homes are properties that were originally purchased using an FHA Insured Loan, and where the property has been taken over by the US Department Of Housing And Urban Development ('HUD') and put-up for sale. Being one of the largest sellers of residential homes in the country, HUD has set-up it's own Online Bidding Website, and has a unique process for selling its properties with its own unique set of 'rules'. Here are some of the important points you'll need to note if you are interested in purchasing a HUD Home.

In order to sell HUD Properties, Real Estate Brokers and their Agents need to register with HUD, and are encouraged to complete highly specialized training that covers the entire HUD Buying Process. HUD Registered Brokers are given a NAID ('Name Address Identification Number') that has to be renewed each year. As only HUD Registered Brokers and Agents can sell HUD Homes, it is imperative that prospective Buyers and Investors interested in buying HUD Homes, engage the services of a HUD Registered Broker or Agent to represent them as their Buyer's Agent.

While anyone can create an account and view all available HUD Homes on the official HUDHomeStore.com Website, only HUD Registered Brokers and Agents can place bids on properties through this website for and on behalf of their clients. Markcorp Worldwide Inc. (of which Atlanta Realty Investors is a division) is a HUD Registered Brokerage.

HUD Properties are offered to various categories of Buyers during different 'Bid Periods'. There are three categories of Buyers. These are Preferred Bidders (which include other Government Agencies, registered Non-Profit Organizations and those individuals qualifying under the 'Good Neighbor Next Door Program'), Owner Occupiers and Investors. Owner Occupiers must be buying the property as their primary residence and must live in the property as their primary residence for at least 12 months immediately following the closing. 'Investors' is a catch-all for everyone else who is not an Owner Occupier or a Preferred Bidder. The 'Good Neighbor Next Door Program' is for Owner Occupiers who are also registered and active Police Officers, Firefighters or Teachers/Educators.

Bid Periods apply to HUD Homes depending on the type of property the HUD Home is. HUD Homes can be divided into three types of properties. These are:

1. Insurable ('IN'). These are properties which HUD deems will qualify for a standard FHA Insured Loan (referred to as an FHA 203(b) Loan) with no apparent repairs being necessary for the Buyer to obtain an FHA Insured Loan.

2. Insurable With Escrow ('IE'). These are properties which HUD deems will qualify for a standard FHA Insured Loan and where FHA mandated repairs do not exceed $5,000. It must be noted here that HUD will not pay for these repairs, but a Buyer's Lender can place up to $5,000 in mandated repair costs in escrow for a Buyer (which will form part of their loan) and will disburse this to contractors as the repairs are completed.

3. Uninsurable ('UN'). These are properties which HUD deems will NOT qualify for a standard FHA Insured Loan as FHA mandated repairs EXCEED $5,000. These properties can often be purchased using an FHA 203(k) or FHA Streamlined 203(k) Repair Loan, or with a similar conventional mortgage, or of course for cash.

HUD Homes are first listed on the HUDHomeStore.com website on a Thursday and the first Bid Period is known as the Lottery Round and is open for Preferred Bidders only. If there are multiple bids at asking price, then the home will be awarded to a qualified bidder based on a Lottery Drawing. This Lottery Round is 5 days long and ends at midnight (central time) on a Monday.

The second Bid Period is known as the Priority or Owner Occupier Period and is open to all Bidders except Investors. For Insurable ('IN') and Insurable With Escrow ('IE') Properties, this period runs for 30 days with bids being 'sealed' for the first 10 days of this 30 day period. If a 'winning bid' is not selected at the end of the 10-day 'Sealed Bid' portion of this Priority Period, then bids are reviewed daily by HUD. After the full 30 days is up, bidding is open to all bidders on these properties, including Investors, and bids are reviewed daily.

For Uninsured ('UN') Properties, the Owner Occupier Period is only 5 days with bids being reviewed on the 5th day. Thereafter bidding goes to a daily basis and is open to all bidders, including Investors.

If there are no accepted offers after an extended period of time, HUD may reduce the asking price and re-list the property. For re-listed Insurable ('IN') and Insurable With Escrow ('IE') Properties, the first 5 days following the re-listing are for Owner Occupiers and Preferred Bidders only and bids are only reviewed after this 5 day period. Once this Re-List Owner Occupier Period is up, all buyers may bid on the property and bids are reviewed daily.

Other Important Factors Concerning HUD Properties

• All HUD Homes are sold 'AS IS'. HUD will not make any repairs to their properties and buyers are prohibited from making repairs prior to closing. This can be a problem for some lenders unless an FHA Insured Loan with an Escrow Repair Account is used, or if the sale is cash.

• If a Buyer's bid is selected as the Winning Bidder on a HUD Home, then the Buyer's Agent has only two business days to deliver to HUD's Asset Manager all required and signed purchase documentation and Earnest Money (in the form of a bank certified check) payable to HUD. There are no exceptions to this rule. Earnest Money is $500 for Homes priced under $50,000 and $1,000 for homes priced at or above $50,000.

• Although utilities at HUD Homes are generally off when these homes are shown to prospective Buyers, if a Buyer is selected as the Winning Bidder and the Buyer does not complete the sale, then the Buyer will forfeit their Earnest Money. Buyer's are advised by HUD to complete a Home Inspection once their bid has been accepted by HUD, but even so, Buyers will probably still loose their Earnest Money if they do not close on the sale even if unforeseen defects are found with the property. While this policy makes no sense at all, this is one of the joys of dealing with a Government run operation and is a risk HUD Buyers need to factor into their calculations when bidding on HUD Homes.

• To add further disincentive for prospective Buyers of HUD Homes, Buyers have to pay for the connection of utilities if they need these connected for a Home Inspection. Additionally, both the Buyer and the Buyer's Agent have to accept liability for any damages that may occur to the property as a result of connecting these utilities. Finally a request, together with a 'Re-Winterization Fee' (usually $75 to $150), has to be submitted to the HUD Asset Manager before utilities can be connected by the Buyer. There are also strict timeframes in which all this must be done.

• HUD also has strict policies if a Buyer's Finance is not approved for any reason and a Buyer may loose some or all of their Earnest Money if their loan is declined. There is NO Financing Contingency on HUD Homes. Additionally, if there are any delays with the closing (including approval of the Buyer's Loan by their lender), then there are daily penalty fees for an extension which must be paid by the Buyer up front when they apply for an extension. Generally only one 15-day extension will be granted by HUD.

For Investors, HUD Homes present an option that needs to be approached with some caution. Generally these do not present the best opportunities for Investors, as Preferred Bidders and Owner Occupiers always have first shot at all HUD Homes. Consequently the better HUD Homes tend to go to these Buyers at higher prices. Still, every now and then, a worthwhile opportunity may present itself for the Investor. For more information on Acquiring HUD Homes, please click here.

To access and search all current HUD Homes in Georgia, please click the link below. This will access the HUDHomeStore.com website at the Georgia Search Page.