What is a VA or HUD Forclosed home?
A HUD Home is a property where there was an FHA loan, and the property was foreclosed on by the lender. When someome uses an
FHA loan to purchase a property and the loan falls thru or forecloses, the balance of the loan owed is paid by the federal
government to the lender and at that point the government takes over the property takes it to foreclosure and resell the
property themselves. In this case they normally use the services of a realtor to re-sell the property.
The actual department of the government that takes charge of the sale for the government is Housing of Urban Development
(HUD). They carry out the negotiation with the realtor to sell the property. All of the FHA loans are insured by the
government and therefore if you fail to make the payments to the lender, then the federal government becomes obligated to pay
off the property for you.
It is true that many of the HUD homes are run down and in need of some serious fix up, but that is not the case in all
situations, many of the HUD homes are in good condition. However this makes the bid price jump sky high and the better homes
are sometimes not the best home to bid on.
Only the homes that are in need of serious rehabilitation are sold below the market, as a matter of fact, many homes are sold
above the market value. The fact that they are forclosed, some folks think they must be selling at a great price and
unknowinly over bid. Be careful and get a valid market analysis before making an offer on any property. If you pay more than
the home is worth, it will be impossible to make a profit.
It has been true in the past, that HUD homes sold at ridiculously low price, but here lately they have been very competitive
in the market.
Since many people may be bidding on the properties, it might sell at or near what a comparable home in the neighborhood is
selling for which is being sold by the actual owner of the property.
Sometimes the owner of the property who was being foreclosed on, failed to maintain or take care of the property and
therefore the property could be in terrible condition.
In many cases, the owner is being ejected and is very angry and sometimes give away everything including the kitchen sink. In
many cases the home has been vacant for months and has been vandalized and possible all the copper tubing for the plumbing
has been ripped out. In other words, you just never know what you are in for, so be cautious.
No matter what the condition of the property is, HUD homes are normally sold AS IS, which means that HUD will not make any
repairs under any condition so you must make sure you have the funds available to make some extensive repairs before you will
be able to successfully market the home.