HUD Homes comprise a huge slice of the foreclosure property pie. But there are differences between HUD Homes and bank homes that matter to buyers and their real estate agents! This is a FREE Webinar for home buyers and real estate agents.
HUD Homes are owned by the federal government, NOT banks!
Real estate agents represent the buyers, NOT a bank, and NOT HUD.
There are inspections performed before a house is put on the market.
Join me for a discussion about HUD homes ... use the TELEPHONE option instead of computer audio if you want to take part in the conversation!
1:30 pm EDT 12:30 pm CDT 11:30 am MDT 10:30 am PDT
This weekend's task is building a new real estate web site in Tucson. I am working with stock photos today, but I will add my own images over the next few days, including an original header. Here's what I have done so far:
I recently published two eBooks about HUD Homes for Sale. One is a consumer book and the other is a professional guide for real estate agents. All of the proceeds from the sale of both books that are sold through October, 2006 will be donated to CARE in a special arrangement with Giving Circle founder Joeann Fossland, who set up the eCommerce donation platform in her online bookstore on her web site: HUD Homes for Sale--A Complete Buyer's Guide ($19.95) and HUD Homes for Sale --A Sales and Marketing Guide for Real Estate Agents ($39.95). Agents who order the Sales and Marketing Guide will receive a BONUS copy of the Complete Buyer's Guide, a $59.90 value for $39.95. Click here at Joeann Fossland's online book store to purchase for the 2 for 1 special. All proceeds collected for these books at Joeann's bookstore will be donated to CARE.
The author has recently published two books about HUD Homes available from the U.S. Dept. of Housing and Urban Development. A recent visitor to her blogs is concerned that FHA buyers and first-time homebuyers are disenfranchised in the HUD Homes marketplace. Chuck Mahoney, president, NOAH FOUNDATION, INC. (National Opportunities for Affordable Housing) left a comment on the blogs. Rather than leave the comment "buried" there, I offer his complete text and my response:
"Although HUD/FHA will finance repair escrows for needed repair issues, HUD/FHA put FHA Borrowers (especially first-time homebuyers) at a distinct disadvantage when it comes to the bid process as follows:
"Those bidders that will require FHA financing must use (as required by HUD/FHA) the HUD appraisal that was done for the subject property. This appraisal limits FHA maximum financing calculations to this appraised value. If the FHA bidder offers a bid that is greater than the HUD List Price (which is also the "HUD Appraised Value") the buyer must make up that difference out of their own funds dollar-for-dollar.
"The major problem with this is that Realtors who work the HUD foreclosure circuit know how to out-bid FHA borrower/buyers by recommending other than FHA financing (typically those lovely 100% loan programs) so that the buyer is no longer required to finance based on the HUD appraisal, but can have another appraisal done by other than an FHA appraiser. This keeps the non-FHA borrower/buyer from having to come out of pocket when bidding above the HUD appraised value!
"The irony is that HUD's mission is to promote ‘affordable’ housing through the use of their FHA loans, but in the case of HUD foreclosures ...the FHA borrower/buyer (which would be almost all first time homebuyers) is actually severely, affordably handicapped if they elect to use FHA financing.
"Worse yet, those buyers that use other than FHA financing typically make offers in excess of the HUD Appraised Valuation causing affordability to disappear like trees in a South American rain forest!"
Frances Flynn Thorsen responds:
Both books about HUD homes are very clear about FHA limitations with respect to bidding:
"Keep in mind an important fact about FHA financing of HUD Homes for Sale: FHA will only finance a maximum loan amount that corresponds to HUD’s asking price. If a buyer is inclined to "bid up" a property and finance that property with FHA financing, he will have to make up the difference between the asking price and the bid amount with additional down payment monies. This can put an FHA buyer at a serious disadvantage in the bidding process. It is advisable under these circumstances to have alternative financing in place to maximize bidding potential."
REALTORS who are educated about the HUD Homes for sale process and learn how to work the HUD Homes circuit successfully understand that there are twists and turns in the process that can make the difference between a sale and a rejected bid. The problem is not with the REALTORS who learn to work the system successfully, the problem is with REALTORS who do not know the ins and outs of the program and are unable to counsel their buyers effectively enough to score a winning bid on a HUD home.
Some years ago HUD used to accept any bid amount on an FHA insurable HUD home, letting a buyer use FHA financing for any winning bid amount. In some areas of the country, properties were being bid at twice the appraised value. Overbidding was rampant and HUD put a brake on that process, limiting the maximum allowable FHA financing to the list price of the HUD home.
I agree that FHA buyers are at a disadvantage in the bidding process for HUD homes. I would like to see HUD’s policy evolve to a more lenient one that would let buyers finance up to 115% of the appraised value of the home. This would keep the brakes on excessive overbidding and keep FHA buyers in the loop in the bidding process.
FHA financing has been a mainstay of mortgage lending in the U.S. for many years. Both books devote two full chapters to FHA financing, including comprehensive information about FHA underwriting guidelines with a special focus on compensating factors that can be weighed to tilt the scales toward an FHA loan approval, and help buyers avoid the pitfalls of subprime lending and the predators who prowl those corridors.
"First-time homebuyers have down payment assistance programs & special below-market interest rate financing available to them on a nationwide basis. Most are never told this by their self proclaimed ‘Real Estate Professionals’ (lenders & realtors). The result is the first time homebuyer is unable to maximize his/her affordability through the access and use of these programs.
"Further, the majority of these programs require that ‘Health and Safety’ repair issues are to be corrected/repaired prior to closing if the Buyer is to receive Down Payment Assistance funding and their below-market interest rate! Once, again, HUD actually puts another affordability ‘roadblock’ in front of the first time homebuyer because HUD does not allow these repairs to be completed prior to closing and as a result, the first time homebuyer looses potentially thousands of dollars in down payment assistance funding and ends up paying hundreds of dollars a month too much through the duration of their home ownership.
"Are HUD foreclosure homes good ‘deals’? Not unless the stars are in the right alignment and it is a full moon...for the first time homebuyer. It just does not make sense to give up $10,000 - $50,000 in down payment assistance dollars (this will vary state-to-state) and below-market interest rate financing (203-k, FHA repair financing is much higher rate than even regular FHA financing) to purchase someone else's repair-needy foreclosure home and then have to finance in repair costs.
"Unfortunately, it appears that Ms. Frances, has little experience helping real-world homebuyers maximize their affordability when compared with her book-writing talents for making money by offering books that pretend to offer ‘everything you need to know’!"
Frances Flynn Thorsen responds:
First-time homebuyers have excellent opportunities to reduce their cash-out-of-pocket expenses as well as to maximize their affordability. The book cautions buyers to know the difference between their qualifying number and a monthly payment amount that corresponds with their lifestyle and other monthly obligations and expectations.
It is unlikely that HUD will change its policy and let buyers complete repairs prior to settlement. There is still a very high fall-through rate of HUD contracts that do not reach the settlement table and it is impractical to invite legal issues surrounding repairs made at a buyer’s expense when a property does not close escrow. I would encourage the Down Payment Assistance providers to rethink their policies and consider making adjustments to those guidelines, perhaps exempting HUD homes from their stringent repair-before-settlement requirements. This would be a feasible alternative with a reasonable cap on the repair amount and a time to complete them.
Buyers are still getting into HUD homes with as little as three percent cash out of pocket. It seems evident that new FHA guidelines will lessen that amount in the near future. Not all buyers are candidates for Down Payment Assistance programs. Down Payment Assistance requirements often preclude a buyer’s approval prospects, (i.e. too much liquid cash after settlement, income limitations, lender choice, seller reluctance to participate the seller "gift" programs).
I have been working with "real world" homebuyers for 22 years. I have sold many HUD homes. I am equally concerned with helping buyers calculate their "Comfort Zone" for monthly spending as I am with maximizing their affordability. To the extent that affordability relates to consumer-friendly loan products, I’m with Mr. Mahoney one hundred percent!
Now that my son Jens and Becca married it's time to get back to work. I just released Frances Flynn Thorsen's HUD Homes For Sale -- A Sales & Marketing Guide For Real Estate Agents. It is available for quick download as an eBook or as a soft cover workbook. This is the first book of its kind for real estate agents, covering the HUD Homes For Sale process, working with the M&M Contractor, special financing considerations, and time tested marketing techniques. The book is 143 pages, measuring 8.5 x 11". Click here for details.
REALTOR/Blogger Frances Flynn Thorsen's new e-Book HUD Homes for Sale -- A Complete Buyer's Guide, is a comprehensive road map of the foreclosure market for HUD Homes.
HUD Homes for Sale -- A Complete Buyer's Guide, contains over 100 pages in an easy-to-follow manual designed to help owner occupants and real estate investors develop winning strategies to bid on HUD properties successfully.
I am a 22-year real estate veteran with many years of experience selling HUD homes. I've been involved with FHA 203(k) rehabilitation financing and held buyers' hands on numerous occasions after they placed successful bids on HUD Homes. My new e-Book has lots of tips you won't find anywhere else!
The U.S. Department of Housing & Urban Development (HUD) is the single largest source of foreclosure properties in the country. Foreclosure web sites flourish and new books hit the shelves monthly with tips about how to buy foreclosures. This is the FIRST book to cover the HUD Homes for Sale market exclusively. Frances Flynn Thorsen's HUD Homes For Sale A Complete Buyer's Guide e-Book will commence delivery via e-mail on Thursday, June 2, 2006.
In an effort to assist families displaced by the Gulf Coast Hurricanes attain homeownership, the U.S. Dept. of Housing & Urban Development will give evacuees the opportunity to buy HUD-owned properties at a discount.
"Our goal through this housing assistance initiative is to give families who have been impacted by the disaster a chance to restore stability to their lives," said Federal Housing Commissioner Brian D. Montgomery. "By becoming homeowners, these families can begin to establish a sense of permanence as they concentrate on putting their lives in order."
In the aftermath of the hurricanes, HUD provided interim rental housing to many families in the form of HUD-owned properties in the states of South Carolina, Georgia, Florida, Kentucky, Tennessee, Arkansas, Oklahoma, and Texas. These families will be offered the opportunity to purchase the homes they are currently occupying at a discount of ten percent off the property's fair market value. Additionally, HUD will help current tenants pay for property repairs by funding a repair escrow equal to 15% of the contract price.
In addition to making homeownership opportunities available to evacuees already occupying HUD owned properties, the Department is establishing a nationwide sales initiative providing discounts and preferences for Gulf area hurricane evacuees seeking housing anywhere in any of the 50 states.
Effective the week of May 1, almost all new properties listed for sale by HUD will be offered exclusively to hurricane evacuees for a period of five days at a price that is ten percent below fair market value.