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
Foreclosure homes have become a major segment of the home sales market. For many home buyers, purchasing a foreclosure property means buying a Great Deal. As with any home, buyers should be informed about the price, the neighborhood, and the condition of any property they are considering to buy.
Another important consideration about purchasing a foreclosure home is the available financing. With financing, not every foreclosure property is equal. Buyers should be aware what lender owns the home, and if there are any special financing options available.
Most foreclosure sellers do not offer special financing. Sometimes it can be difficult to purchase a foreclosure property, especially if there are condition issues. If a property has deferred maintenance, a new lender may not be willing to make a new loan on the property. Foreclosures are always sold “as is” and without repairs. This means that if the appraiser requires repairs to be done prior to the closing of your loan and your lender will not escrow for the repairs, you will not be able to buy the property. I do not know of any foreclosure seller that will allow a buyer to make repairs prior to closing and almost never will the seller make repairs.
FHA offers a great HUD foreclosure program. Regular FHA loan terms apply, which means the buyer can take advantage of the exceptionally low interest rates that FHA offers. Depending upon the severity of the repairs to the property, FHA may allow you to escrow for repairs. Please refer to a blog I wrote months ago about insured and uninsured properties.
This is one of my favorite loan programs in regards to foreclosures. You can search for a HUD Home here .
FNMA offers special financing with their HomePath program. These loans feature low down payments. One feature that many buyers like is that the loan does not have mortgage insurance. This is true but the interest rate tends to be a little higher.
FNMA also will allow after closing renovations, which can be an excellent option for someone purchasing a HomePath home.
Understanding your financing options is an important part of any home purchase decision. And it is especially important for those home buyers who are considering purchasing a foreclosure home. Some loan programs simply will not work with a foreclosed property. I strongly recommend not using a VA loan on a foreclosure property.
If you have questions regarding real estate please call me at 405-213-2992 or visit my website http://www.sandiwalker.net
HUD homes can be a very good deal. When someone with a FHA loan which is backed by HUD (Housing and Urban Development) can’t meet the payments, the lender forecloses on the home; HUD pays the lender what is owed; and HUD takes ownership of the home. It now becomes a government owned home.
HUD obtains a new FHA appraisal to determine the value of the property in its current condition. This becomes the list price of the house. HUD first attempts to sell the properties to owner occupants. If no acceptable offers are made by owner occupants then HUD allows investors to bid on the properties. HUD will lower the list price after some time on the market if no acceptable bids are received. While they want the most money for the property they can get, it’s not like they are going to decide to not sell and hold the property. Therefore, the longer the home is on the market the less HUD will be willing to take for it.
While the price of the house is often lower than other homes in the neighborhood, the property may need work to bring it up to a certain standard. I always tell my clients that if the prior owner didn’t have the money to pay the mortgage, they probably also didn’t have the money to maintain the property either. So just know that there is normally deferred maintenance on these homes.
I always believe it is smart to look around the neighborhood and see what else is available. If the HUD property is $95,000 and needs $10,000 in repairs but the house across the street is in better condition and has a seller who is willing to make some repairs if found on an inspection and is priced at $103,000. The house non-HUD property may be the better deal.
Please note that there are times that it may not be wise to purchase a HUD property over a traditional sale. This properties are sold “as is” with no repairs. If you are unable to make the necessary repairs or the repairs are beyond your budget, it may not be advised to enter into the purchase.
If you have questions about HUD properties or real estate in general please feel free to ask. My phone number is 405-213-2992 or visit my website at http://www.sandiwalker.net
You can know the price a HUD property went under contract for prior to it closing.
In the good old days HUD would post every bid on their website after the bid was over and the world could see each and every bid. Today, they are not as forthcoming with information. However you can still view the net amount of the winning bid to HUD.
Go to HUD’s website, http://www.hudhomestore.com, click on bid results. A new window will open. Fill in the state and maybe the city or the zip code. It will list all of the properties which have recently sold. It does take HUD a few days to list the information here and will not be available the day the bid is open.
You will be able to see the real estate firm that sold the property, the net amount of the bid to HUD, and whether the buyer is an owner occupant or an investor.
By reviewing past winning bids, buyers can understand the way the market is bidding on these types of properties. This can show whether the list prices are being exceeded or if buyers are paying the list price or less.
It also shows the dated the offer was submitted, opened, and accepted. If a time delay is shown between the date opened and accepted, the public can understand that this was a back up bid.
If you need help on a HUD property, call me. I specialize in selling HUDs and other repo properties and know how to get them closed. Feel free to call me at 213-2992 with any of your real estate needs or visit my website http://www.sandiwalker.net.
And be sure to follow my blogs.
People often ask me how HUD prices their homes. It is very simple. They obtain a FHA appraisal from a licensed appraiser. The appraisal price is the list price. If a buyer is obtaining a new FHA loan to purchase the property, the lender will use this appraisal. So if a buyer using a FHA loan bids over the list price, they will need to bring the difference to the table. If the buyer is using a conventional loan then a new appraisal will be obtained.
I have sold many HUD properties over the years and have seen some incredibly low appraised values on these properties. In these instances, multiple buyers tend to bid the price back up to fair market value—the price an educated buyer is willing to pay.
Sometimes the appraisal price is higher than a buyer is willing to pay. If so, HUD will reduce the sales price in time. It always makes me shake my head when a property has been on the market for awhile, the price is reduced and the buyer then pays more than the new list price. Why that buyer didn’t make an offer before, I don’t know. Maybe they just didn’t see the value at the old price structure.
During the initial bidding period when the bids are sealed for 5-10 days (depending if the property is insured or not, another blog topic) I strongly suggest making your highest and best offer. If the property is past the initial bid cycle and can now be bid on as a daily bid, the buyer may bid more aggressively. Just remember someone else may be bidding on the property also, at what price you are willing to lose the property.
Unless the property has been on the market for a long period of time (120-180 days) do not expect HUD to take a low ball offer.
A few days after the bid is accepted, HUD will post the winning bid amount in the bid review. Remember this is a net amount to HUD so you will need to adjust the amount to cover commissions to get a more accurate dollar amount.
If you want to purchase a HUD property, call a realtor who knows the HUD process and can assist you in getting the property closed.
If you have real estate questions, please feel free to call me at 405-213-2992 or visit my website. And be sure to follow my blogs for more useful info.