Need help "Insured w Escrow repairs " HUD homes

Foreclosures, Short Sales, Tax Foreclosures
1

when a property is listed like this

HUD home. Price reduced. Sold ‘AS IS’ by Elec Bid only. For Prop. conditions, Forms, Discl, Avail & Owner Occupant Incentives see Website in Agent Remarks*. FHA Case #263-355&*(. Insured w Escrow repairs $2255. Bids due by 7-15-08 11:59 PM or daily until sold. MCB makes no warranty as to current or future existence of mold in this property and is not liable for the potentially harmful effects thereof. LBP.

can a realtor or anyone explain this to me. what does the Insured w Escrow repairs $2255 mean exactly ?? and how do these homes get put under contract ?? i’ve see alot of these with bids due or electronic bids only. These are hud homes that feel into foreclosure. I’ve seen listings on alot of these. the property looks good but then reading it sounds as if theres alot wrong with them.

also these are meant for 203k FHA financing, if you are cash buyer how does that help with the purchase price ??

2

Well I got a general idea of how HUD foreclosures work from some looking it up on the internet.

but still have some questions for any realtor’s or broker’s who deal with them.

3

A licensed broker must submit bids to purchase any HUD foreclosure. After winning the bid, a purchaser is allowed time to pay for an inspection on the property. If the purchaser is not satisfied with the results of the inspection, he is allowed to withdraw his offer to purchase. The 203K HUD loan is for purchase and rehab; if the purchaser does not need financing, HUD will not have to pay closing costs, and will reduce the price of the house to reflect that fact.

4

most HUD homes have home inspections already done on them correct ?? or at least i have seen and read some.
how easily can you back out of a winning bid ??

i can see how a new home inspection might turn up alot more problems.

how does HUD determine their selling price ?? highest bidder ??

5

Some homes qualify straight-up for HUD insured financing, some will qualify but the buyer has to post funds to escrow for required repairs, and some will not qualify for HUD insured financing.

In your case, a Owner-occupier can finance the purchase with a HUD-insured loan but will have to escrw an additional $2255 for repairs required to mee HUD requirements. Once the repairs are accomplished, the escrow amount can be returned. If not, HUD will use the escrow funds to accomplish the repairs.

http://portal.hud.gov/portal/page?_pageid=73,1827594&_dad=portal&_schema=PORTAL

Keith

6

can a realtor or anyone explain this to me. what does the Insured w Escrow repairs $2255 mean exactly ??

Insured means that an owner occupant can purchase the home with FHA financing. If the buyer does not put at least 20% down, the property qualifies for HUD’s mortgage insurance program.

HUD’s property inspector has estimated that the property will need $2255 to correct the significant inspection deficiencies noted. If an owner occupant buyer wants to finance the repairs, HUD will allow $2255 to be added to the mortgage loan amount. This $2255 will be held in escrow to pay for the repairs. The repairs must be completed as a condition of HUD’s mortgage insurance. If there are funds left in the escrow account after the repairs are completed, they will be refunded to the buyer/borrower.

and how do these homes get put under contract ?? i’ve see alot of these with bids due or electronic bids only.

A HUD approved broker must submit your bid. The broker will use HUD’s electronic (on-line) bidding system to submit your bid. If your bid is accepted, then the broker will submit a hard copy of your contract with a copy of your earnest money deposit.

the property looks good but then reading it sounds as if theres alot wrong with them.

You should always get your own property inspection done to be sure. HUD properties are usually inspected after power has been turned off, so, the inspector is not always able to accurately describe the condition of electrical and HVAC systems, and whether or not any electrical appliances (including a water heater) and systems are in working condition.

HUD always includes a mold alert even if there is no mold visible.

also these are meant for 203k FHA financing, if you are cash buyer how does that help with the purchase price ??

203k financing is an owner occupant loan program for properties that need extensive rehab. The buyer is allowed to finance the purchase price and the rehab cost in a single mortgage. If you are an owner occupant cash buyer, then you will not be using HUD financing, so the 203k loan program will not be used.

If you are a cash buyer, your bid will result in a higher net to HUD than the same bid using HUD financing. A higher net to HUD improves your chances of winning the bid. As a cash buyer you can even bid a little lower than a buyer who is using HUD financing and still win the bid because your net to HUD can still be higher.