Real Estate

HUD House is too cheap

HUD properties are priced based on a FHA appraisal.
Sometimes the FHA appraisal comes in lower than what the market might believe it is worth. Recently there was such a house in our area that was priced ridiculously low and had a low repair escrow. Why the appraiser deemed the property so low is a mystery to me as well as many others. An appraisal is only an opinion of value, but the market always dictates value. So my guess is that buyers who really want the property will bid what they believe to be fair market value and not what the appraiser believes to be the value.
The low FHA appraisal can cause some issues for a buyer, especially if they are obtaining a FHA loan. Any amount bid over the FHA appraisal amount will need to be brought to the closing table as additional down payment money. If the buyer does not have the ability to obtain a conventional loan or does not have the additional money above the FHA appraised amount, they will not be able to bid more than the appraised price. This will limit some buyers from purchasing the home at what they believe to be fair market value.
If a buyer is able to obtain a conventional loan, a new appraisal can be obtained often times at a higher value allowing the buyer to obtain financing for the property without additional required money.
HUD is first and foremost marketing these properties to owner occupants many who only qualify for FHA financing with its lower down payment requirements and easier credit standards. Unfortunately, when an appraisal comes in low on these properties and a frenzy of activity ensues; many FHA buyers will be limited on what they can bid on the property, due to their inability to bring additions funds to the table.
If you are interested in purchasing a HUD property or have other real estate questions, please feel free to contact me. Sandi Walker 405-213-2992 or visit my website at

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