HUD Homes Are NOT Hard To Buy!

There is a common misconception that HUD homes are trashed out, dilapidated and often times totally worthless.  This could not be further from the truth.  Many HUD properties require minimal repairs and can be discounted by far more than it will cost to make the repairs. 

On occasion, there will be homes with foundation issues, mold, or water damage that most owner occupants will not be able to pay cash for, or can not get a mortgage company to finance, so keep your eyes out for these deals.  I have bought and sold many HUD homes with profits ranging from 20% to 30% and even 75% on one occasion, so don't think that it can't be done. 

What is a HUD home?  A HUD home is a property that was once purchased with a Federal Housing Administration (FHA) loan and is now foreclosed.  Once the home has been foreclosed and the principal balance paid back to the mortgage lender, the home is then sold at auction by the Housing and Urban Development (HUD) at near or close to retail value.

There is a 10 day window at auction for owner occupants to first bid.  If the home is not sold within the first 10 days of the initial offer period, investors can then bid on the home.  Once a offer has been accepted, the buyer will be notified usually within 24-48 hours.  

It takes anywhere from 25-45 days to close on a HUD home although I have seen this extended further on occasion.  HUD is very particular about keeping a strict time line on closing, so you have to get the inspection completed and have your financing in place as soon as possible.

In my early days of investing, I bought many HUD homes as owner occupant and stayed in them for the specified time, which was 1 year as occupant and 2 years as owner before I was able to sell or at least start working on my exit strategy.  This strategy can work well for many beginning investor.

If you happen to have your real estate license, you may be able to leverage your offer more than other owner occupants you may be bidding against.  Since HUD accepts the offer with the most net proceeds to them, being able to waive commissions that can range from 2-5% can give you a significant advantage over the competition.  This is one way I beat out bidders as well.  Another method is to buy the houses that others run from.  foundation issues, water damage, and electrical seem to scare away many, but not me.  I just discount the price accordingly and press on!

Just because you hear about the horrors of HUD homes does not mean it is not worth looking into.  Remember - if you don't do the research yourself, your just leaving one more deal out there for someone else.