HUD QUESTION

Foreclosures, Short Sales, Tax Foreclosures
1

Hi,

I am new to HUD home investing and wanted to know if anyone out there has information that they would like to share. Most of the homes that I am interested in are either out of state or several hours away within my own state. I wanted to know if it is possible to see the home in order to inspect and see the condition. I only see the listings for a few days so I can’t seem to time it right to take a look at it before it’s gone. How are the rest of you working with HUD homes? Also does anyone know what a 203K is? Is it financing from HUD?

Are HUD homes in your opinion a good investment? Are they normally asking market value or are they normally being offered under market value?

Any help would be greatly appreciated?

Thanks,
Hinestro ???

2

hinestro,

I recently purchased a HUD here in Louisiana. It is possible to see the properties. You need to find a HUD qualified agent in the area where the property is located. They will be knowledgeable about the process and will have the “HUD key”…(HUD doesn’t use lock boxes in this area).

You only see the listings for a few days because that’s usually about how long they last. Here is how it works:

(1) The HUD property is listed for sale (go to http://www.hud.gov/homes/index.cfm for further explanation and state-by-state listings). Here in this area the new homes are normally posted on Thursday.

(2) For nine calendar days the priority purchasers are those that will owner-occupy the property (they are buying the house to live in).

(3) If, after the nine days, HUD has not received an offer acceptable to them, the listing opens up to everyone. This will be your chance as an investor to bid on the property. Here in this area, the competition is pretty strong once it opens and they usually sell the first day. All bids received (it is an electronic process) are reviewed every day at the cut-off time. The highest bid (meaning the highest net $$$ to HUD) wins as long as it meets the HUD accptance threshold. You can ask HUD to pay closiong costs, etc., etc. but that cuts into the “net to HUD”.

A “203K” is a federal loan program to rehab substandard housing. See: http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm

It is federal “insurance” that allows you to take out a single mortgage to pay for the home AND the repairs.

I paid $51K for the HUD that I bought and have put about $3,500 into it (doors, baseboards, paint, carpet, paint, new locks, new screens (a MUST in Louisiana), furnace maintenance/cleaning, a refrig (did i mention paint?), etc…mostly all cosmetic kind of stuff. I paid cash for the property and the closing costs were minimal.

The property should appraise at about $60-65K now (well, soon, I am just about finished!). It will rent in this area for $650-675. Based on the new appraisal and a solid lease, I will have no trouble doing a cash out refi and recoup most of my out-of-pocket and still leave me a strong monthly positive cash flow.

Hope this helps!

Keith

3

Keith,

Thanks that really helps. Appreciate it.

Jessica

4

Hey Jessica: Keith hit it on the head, but each state is different. I’m in metro Detroit and HUds can stay on the market for months and months. Have you looked at Fannie Mae foreclosures? I’ve purchased a couple and have found them to be a little better in terms of condition. Generally not as trashed, and they’ll help with closing costs. I got into mine with just the pre-paids
(about $3 to $4k on $100,000 purchase). I guess the only thing I can say is STAY CLOSE TO HOME. If you’re going to be doing these as rentals or flipping them with light rehabs, etc… you definitely want to be close to home so you have easy and quick access to them.

                            Good Luck and happy investing!

                                              Johnny Mac
5

Thanks for the advice.

One other questions, when you say that they help with closing cost is that something that Hud, Fannie Mae, etc… has already established or is that something that you negotiate when you bid?

I live in S. Florida so you can jsut imagine that they are gone right when they are listed.

Also, regarding the occupied only, let me make sure understand. That means that during that timeframe only people who have intentions of living in the house can bid? If it is listed without that then investors can bid?

Thanks

6

hinestro,

The link to go to the homes in Florida is:

http://hud1.towerauction.net/FL.htm

The “Priority” column of the listing will say either “Owner Occupant” or “All Bidders”. If an agent knowingly submits a bid for an investor during the “Owner Occupant” period, they can lose their ‘license’ to do HUD work.

For instance, if you go to the link above and click on “Search by City”, and then select “Miami” you will see one listing and it is open to all bidders (including investors) – so, you could bid this property (thru your realtor that is authorized to do HUD). The cut-off time is midnight. All bids received during a day are opened the next day and the highest bidder that exceeds HUD’s lowest acceptable price is the winner. However, if the column says “Owner Occupied”, investors may not submit a bid.

Hope this helps! :slight_smile:

Keith