hud

General Real Estate Investing
1

okay, wow.

so we’re flying down south to take a look at some HUD homes.

i’ve got a few questions ;D

  1. HUD appraises their properties, and the list prices are market value.

this is based on the “as-is” condition of the property, correct?

are the HUD appraisals generally low? because i’m looking at some really nice homes, that seem very reasonable and online comps show that (some of them) are over 40% BMV.

  1. OO’s get a 10 inspection period automatically.

what’s the deal for NOO’s - you must submit your bid with inspection contingency, or like a repair contingency?

or, as NOO, should you have the property inspected prior to making bid? that just seems too time consuming to set that all up.

  1. the Marketing & Management Company turns on the utilities for the OO, in order for them to complete inspection…again, during the 10 day automatic time frame that OO has to have property inspected.

what about the NOO? how does the M&M interact with the investor?

  1. FHA loans not applicable to NOO.

i do not want loan on my personal credit, under any circumstances. i’ll guarantee the loan personally (LLC financials less than 2 years), but i do not want the 30k or so, to be on my personal credit, at all. is this doable? whooooooooooo??? :o

thanks ya’ll

2

  1. I’ve purchased several HUD foreclosures and still don’t quite understand how they come up with their list price sometimes. For instance, most of the time, I’ve seen homes appraised a lot lower than their FMV - and these were homes that were fairly new and had very litle, if anything, wrong with them. Then there are others that are on the opposite realm of the spectrum: older, more problems, yet are priced > FMV. Matter of fact, a couple of months ago, I was looking at some HUD f/c’s and there were two in the same neighborhood. One was a 3/2 and about 1600sf with little wrong with it, and the other was a 2/1 at about 1200sf (again, with nothing wrong with it). The 3/2 was about $8,000 LESS than the 2/1. Why? I haven’t a clue.

  2. I think it’s 10 days (may be 7 - I can’t remember right off hand) from the point that HUD has an executed contract with you (i.e., not from the time you were notified of being the winning bidder). I’m pretty sure you don’t need to submit a contingency as it is automatic. IOW, if you don’t like something, you can back out during that period. I haven’t done it (back out of an offer) yet, though, so I’m not entirely sure. You have to do the formal inspection AFTER you have an executed contract. HUD won’t allow you to turn on the utilities beforehand (that is, until they have a contract with you).

  3. Actually, YOU are solely responsible for the inspection as an investor. YOU have to call all the utility companies and get things scheduled. It can be a pain sometimes, too, since you have to track down the names/numbers of the utility companies, and even then I’ve had some (TXU Energy, for one) that require several days’ notice. The best thing to do is know who services the property BEFOREHAND, so you can at least avoid researching it afterward. Also, be wary that HUD - like any other government agency - loves to play the hurry-up-and-wait game. I actually found out I was the winning bidder on one HUD and thought “hmmmm, better call the utilitiy companies and inspector to line up an inspection.” It turned out my agent told me later that HUD could VOID THE DEAL if I did so without them having an executed contract on their desk. So I had to call everyone back and reschedule it when HUD finally got their paperwork. It can be a $#%@ pain dealing with them.

  4. Just be sure that when you submit the offers that you state the entity on HUD’s paperwork. I’ve only used my personal name/credit, so I don’t know what other gotchas HUD may have (if any) concerning this approach. I just know if the names don’t match-up later, HUD won’t hesitate to pull the plug on the deal altogether.