Happy Memorial Day!!
I do apologize for the lateness of the email this week, but I just got home! 🙂 My family went over to Sunriver for the holiday…in part to relax, and in part to visit our oldest daughter who recently moved out on her own to Bend. It is still difficult for me…..I miss her… Anyhow, the weather was cloudy and cool, with a couple of rain showers so nothing desert-like about that, and I guess we missed the big thunderstorms? I love thunderstorms so that is kind of sad, really. However, it was lovely to get away for awhile….even though I didn’t always seem to have phone service! I was returning phone calls this evening as we came over Mt Hood! LOL I had missed 3 phone calls this weekend, and if you were one of them, then I am sorry! You should have a voicemail from me now. 😀 It was funny though as 2 of the phone messages were about the same things…HUD homes. Because of this, I am going to deviate (I know, again) this week and talk about HUD homes real quick. As always though…this is a short description so if you have ANY questions, please call or email me! You know that I am usually MUCH better at getting back to you than this…. I hope your holiday was wonderful and that you had time to enjoy some time with your family…..and time to remember why we celebrate this holiday…. Thank you to those you have served, or continue to serve.
What is a HUD home?
A HUD home is a home with a FHA loan that went into foreclosure. HUD actually owns the home/loan, but FHA insures it….hence a FHA loan. These are foreclosures, and these homes really are ‘as-is’. With a bank owned home sometimes we can get the bank to do some lender required repairs (sometimes, but not usually, and especially not in cases of multiple offers), and sometimes we can do ‘small’, and most especially CHEAP, repairs on a home, but with a HUD owned home there is to be NOTHING done on a home prior to closing. In fact, with a HUD home, HUD will send out an inspector prior to closing to inspect the home to make sure that nothing has been done with it and that it is in the same condition as it was when it was listed…..that’s all they check.
With any other home sale the appraisal is paid for by the buyer, and done after the home inspection. HUD homes are a bit different as prior to listing a home HUD has an appraisal come out and check out the home. The appraisal does an appraisal on the home, and calls out any lender required repairs. Remember that when an inspector calls out a repair these are ‘suggestions’, but when an appraiser calls out a repair these are now ‘lender required’ repairs which means if the repairs aren’t done, the home doesn’t get financed, and you can’t purchase it. These lender required repairs are then called, ‘repair escrow’. The catch is that an appraiser is not a contractor so really has no idea what these repairs may actually cost, so it is really just a guesstimate. These repairs are not done prior to closing, but done afterward. The cost of the repairs is an additional cost that must be added to your loan, or is cash you must bring in to closing. As you can probably figure any HUD home with a repair escrow won’t be able to finance with a FHA loan, or any state assistance loan, such as downpayment assistance. Most HUD homes are sold with cash offers, conventional loans, or with FHA203k loans. If you are potentially interested in a 203k loan then call Chris Berg at Pinnacle Home Mortgage at 503-320-0925.
How is an offer made on a HUD home?
When a HUD home is first listed, there is a 10 day window before HUD will look at any offer. What this means if you, and your buyers agent, make an offer on the 1st day, or the 3rd day, or the 7th day…it doesn’t matter…HUD will not look at offers until the 10th day from listing. When a bank owned home receives multiple offer, the bank will respond requesting buyers ‘highest and best’ offers, and choose the highest, or best offer for the bank. With a HUD home they will take the best offer right out front…no request for ‘highest and best’. Do NOT write an offer for higher than appraised price!!! I can not stress this enough….a bank will only loan you as much as the home appraises for….no more! IF you write an offer for higher than the appraised amount then you, the buyer, will be expected to bring that amount in as cash to closing. When you, and your buyers agent, make an offer it will be on their paperwork, and you will need to give your buyers agent your social security number to put the offer into the HUD system. It is a bidding auction online, and you only get one offer….
After the 10th day, HUD will look at offers daily, and after 30 days investor offers are welcomed.
When you make an offer on a HUD home you still include the inspection, financing, insurance, and utilities contingencies. Your buyers agent, and the sellers (HUD) agents should be verifying that all utilities are on prior to inspection as with HUD homes there is NO utilities on at the home. What this means to you is that you should plan to see the home during the daylight hours, and that you schedule the home inspection for at least 3 days out so that utilities have time to get turned on. Again, there will be NO repairs, so the inspection is really for your own knowledge. An agent will tell you that HUD will do repairs up to $4,000, but HUD doesn’t actually do the repairs. They are put into a repair escrow which means it is then financed into your loan, or becomes cash that you bring in to closing. If the repairs are guesstimated to be over $4,000 then the home is considered no longer insurable. Just like any other home purchase, if you chose to back out after inspection (and you still can), then you do receive your earnest money back, but the inspection cost is non-refundable.
Not many HUD homes are insurable (meaning no escrow repair), and the ones that are go fairly quickly. If the HUD home has no escrow repair then you can consider it with FHA, or state bond down payment assistance. Most HUD homes are IE, or insurable with escrow repair. This is something for you, the buyer, to consider….these homes will not finance with FHA, or downpayment assistance. You can go FHA203k though….as long as those repairs can be financed into your loan or you have the money to bring in to closing for those repairs. Then there are the HUD homes that have repairs over $4000 and will go cash, or conventional loans only.
Be wary of any realtor or lender who promotes the ‘Good Neighbor Next Door’ program! This is a fabulous program for firefighters, EMT’s, police officers, and teachers where they can buy a HUD home for 50% of listing price. You still have to offer just like everyone else, and all other rules apply, but if you are the winning bid, and can prove you are employed in one of those careers then HUD will sell you the home for 50% of listed price. The catch? There has only been a couple of these homes available in Washington in the last couple of years, and currently there are none available. These are very rare, and few are ever available. There are agents who will promote this loan like crazy to get you in so that they, (in an agents words at the training) “get the buyer in, and get them interested enough so that you can lock them into something else”. Wow! Talk about misrepresentation!! ….as always….be aware….there are a LOT of great programs out there that are not currently being funded. Sadly there are also a lot of lenders and agents who will promote these…knowing that…they use these as a way to get you in, but can’t actually deliver. Remember…if it walks like a rat, smells like a rat, and sounds like a rat…..what is it again?
There are a lot of HUD homes out there, but you need to know what you are looking at….and what your options are. There are also a lot of great homes out there that are not HUD homes, or short sales. I can guarantee you that if you are patient you will find a home you love, and that will love you back! Buying your first home is a roller coaster experience, and yes, it is stressful, but it should also be fun and exciting! A buyers agents job is to advise, assist, and help you with the process…including giving you all your options, walking you through each step of the process, and keeping you informed.
If you know anyone who is thinking about buying a home, our next class is Saturday, June 2, 2012, at the Vancouver YMCA located at 11324 NE 51st Circle from 9am-1pm! With reservations, lunch is included…. 🙂
Please let me know if you have any questions! And again as always, if you are looking for a buyer’s agent, please give me a call or drop me an email…I would love to help you with your home buying adventure!
Please call, email, text, or even facebook me (at Tracie DeMars Real Estate Q&A) anytime with any questions, or if there is anything I can do to assist you with your home buying adventure! As a buyers agent, I am, as always, here to help!! 😀
Thank you again for your business and for your referrals!
If there is anything you would like to see on here…please let me know and I will make it a weekly note!
…as always…if you have already purchased a home, or no longer would like to receive these emails from me, please let me know and I will be happy to remove you from receiving any more.
Thank you again for attending the home buyer education classes, and I hope that you will continue to refer the classes out to your friends, family, and co-workers. Upcoming class dates and times are located at www.freehomebuyerclasses.com. Just click on the link on the left hand side. We appreciate your referrals and word of mouth! Also, if you have somewhere that we can place the flyers at, please let me know….
Next Week: finding a home, and questions to ask (or the 3 insurances you need to know about)
Last Week: interest Rates vs. APR…and how can you tell
Remember that you can always go to ‘Free Home Buyer Education’ on Facebook for all of my weekly blogs and upcoming class dates/times/locations. I post the weekly blogs on there as well.
Have a great day, and I will talk to you soon,