HUD-FHA homes are owned by federal agencies; the United States Department of Housing and Urban Development and or the Federal Housing Authority. The foreclosure properties are obtained by applying for a HUD-backed loan through an individual lender. From that point onward, HUD vouches for repayment of the loan, which means HUD will repay the lender should the borrower fail to do so.
How Property Becomes HUD-FHA Properties
In the event that the homeowner does fail to pay their mortgage and a foreclosure is instituted, HUD will repossess the property. The loan will be paid off and HUD will take full ownership of the property. From that point on the property will belong to HUD and the agency can dispose of the property as it sees fit.
After acquiring the property the next step is to sell it to another homeowner. If HUD uses a real estate broker to initiate the sale of the home, the broker will take over certain pertinent duties related to the sale of the home. This will result in the earning of a commission, usually 6%. It is important to note that real estate agents are allowed to bid on HUD foreclosure homes and purchase them on their own, but they need to go through a HUD broker.
All HUD properties are sold as is on a cash basis. This does not mean that an individual has to have cash in hand to buy it but they will need to obtain a loan from an outside lender. HUD foreclosure homes are usually of a lower to intermediate price range of home and some homes will be in better conditions than others will.
How to Find HUD-FHA Homes
There are a few different ways to locate HUD-FHA homes. One way is to search the real estate advertisements in the newspaper. Another is to contact a HUD broker or contact HUD directly for a listing of HUD brokers in the area. When a potential HUD foreclosure home is found, it is time to move forward with the purchasing process.
Buying A HUD-FHA Home
It is important to adequately inspect the property and make sure it is what you are looking for, both inside and out. If it is you will need to submit a HUD bid package to the area HUD office along with a 5% deposit. This deposit is non-refundable. The prospective buyer will have to wait for the bid to be accepted and if so, will have 30 days to close escrow.
Reasons to Buy a HUD-FHA Home
HUD homes tend to be very low priced, but some individuals buy HUD homes not only for the price but also for the overall quality of the home itself. Although most HUD foreclosure homes are of a modest level, some are very nice and it is not that difficult to find a foreclosure home that is perfectly suited for most people.