There are pros and cons involved in the purchase of a HUD home. Getting familiar with the ins and outs of the HUD program is the best way to get started. Then, you need to hire the experts who are certified in the speciality and will guide you throughout the process with knowledge, experience, and professionalism. Let’s look at some of the advantages and disadvantages to buying a HUD home.
Pros of buying a HUD home:
HUD stands for the U.S. Department of Housing and Urban Development. A HUD home is a home bought through an FHA-insured mortgage. But when the borrower failed to pay the mortgage, the property was foreclosed. While foreclosure has gained a negative connotation, purchasing a HUD home comes with many benefits.
• Less competition for the property.
The main goal of HUD is to bring homeownership to improve communities. Because of this aim, Most HUD homeowners are individuals and not investors. Investors are not allowed to bid for the insured property until the 30th day it is listed. This way, homebuyers have lower competition in the first few weeks that the HUD home is on the market. Investors are usually hard to beat during cash bids.
• Lower closing costs.
In most HUD home purchases, part of the closing costs is already paid for by HUD. You only have to make sure that you will negotiate this in the bid. They can amount up to 3%, which includes the transfer charges and recording fee. The proration of property taxes is part of the costs that HUD will shoulder too. These deductions, no doubt, make HUD homes more affordable.
• Easy to find.
Foreclosures happen all the time, and a lot of those foreclosed properties go into the HUD program. HUD homes are a good source of options for those looking to buy a new home. The HUD website has a lot of homes that are on sale. You can find the most up-to-date listings and browse houses based on their prices. There are also real estate professionals who can help you find the best HUD home for you.
• Good prices
Unlike individual home sellers, the HUD isn't after the profit on the home sale. When a house gets foreclosed on, they carry out an appraisal to arrive at its fair market value. The price of the home will fall in that range.
A HUD home will usually require repairs before you can live in it. One good thing about some HUD homes part of the amount used for repairs is deducted from the price. Take note though, that such programs have qualifications too. Once you qualify, this will definitely take out a few bucks from the expenses you have for the new home. There are a lot of programs that give significant discounts which you can take advantage of as well.
Cons of buying a HUD home:
In HUD home sales, the pros greatly outweigh the cons. While that is true, you still have to adjust to the very few drawbacks you may face. Here are a few of them:
• The property is sold “as-is”
Most, if not all, foreclosed properties will need to be subject to repairs right after purchase. Since you are not buying it from an individual property owner, there is no room to negotiate for renovations before closing the deal. And when there are repairs to be done, this means you need to shell out extra money to make the house more livable.
An overall visual assessment of the home before submitting your bid will help you factor in the repair costs into your budget. Once you're under contract, pay for an inspection to see what kind of improvement the property needs.
One of the significant differences between a conventional and a HUD foreclosure is the timeline. A regular home sale closes in three or four months. A HUD transaction is required to close within less than two months. Within a few days of offer acceptance, you have to procure a certified check for the deposit. You also only have a few weeks to secure a mortgage commitment, an appraisal and inspection, and an insurance policy.
Hiring a HUD-qualified real estate professional can help with a smooth HUD home buying process. Housing and Urban Development (HUD) Certified Neighborhood Listing Broker, Nancy Braun, is licensed and qualified to assist HUD home buyers in both North Carolina and South Carolina. For more information on buying HUD homes, call Nancy at (704) 997-3794.