HUD Properties

HUD will no longer provide an appraisal on their properties

HUD has changed the rules again on the repo properties. For as long as I can remember HUD has had an appraisal on the property that they are selling and used the appraisal price as the list price. They would also state if it was insurable or non- insurable. Meaning that it would be allowed to go FHA with some repairs or not (see a previous blog). Now HUD is no longer providing their appraisals to the buyer. The buyer must obtain their own appraisal.
HUD has not explained why the change in procedure nor have they explained some of the ramifications that can now occur under these new guidelines. The following are some questions that persist.
What if the appraisal comes in low? Will HUD change the price to the buyer to match the new appraisal price or will the consumer need to bring additional funds to closing?
What if the escrows are vastly different?
What if the new appraiser will no longer allow the property to go FHA?
Does the old standard of insured vs non-insured still apply?
Having spoken with various people including asset managers and listing agents, the facts are still very unclear. It seems most agree that if the appraisal comes in low that the property will need to be put back on the market, unless the buyer will pay the difference between the new appraised price and the contract price. Although I do not know if it will go back at the same price or the new appraisal price. The HUD asset manager was not sure when I asked.
Please know that two appraisers can have two different opinions of price and condition. This may result in a buyer paying for an appraisal on a property that they cannot get financing. This creates an issue for my buyers attempting to purchase a repo in order to save money. They will need to look at the condition of the property more carefully and decide if they are willing to risk the cost of an appraisal to learn if the property will indeed finance.
This may scare off owner occupant buyers and cause more HUD properties to be sold to investors. Only time will tell.
My personal thought is that HUD will try this approach for 6 months or so and then review the facts and determine if they are going to continue to sell property this way or not.
If you are looking to purchase or sell a home in the Oklahoma City area, I would love to help you. If you have questions regarding real estate, please call me. 405-213-2992 or visit my website http://www.sandiwalker.com

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