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        Make an Offer on HUD Homes           

How to Make and Offer

Before HUD homes are listed for bidding, HUD orders an appraisal and an inspection on a house.  Each home generally falls into three categories:

1) Insurable property (IN),

An insurable property is a home that meets the insurance requirements for an FHA 203(b) mortgage. An FHA 203(b) mortgage is FHA typical 30 year fixed-rate mortgage that most first-time homebuyers use to finance a home. Generally, no repairs are necessary for HUD to insure an FHA loan for the buyer. Offers from buyers with other-than-FHA financing such as VA loans, conventional mortgages or cash buyers are also acceptable for this type of property. These homes generally do not sell at a large discount from market price.

2) Insurable with repair escrow property (IE),

An insurable property with a repair escrow refers to a home that is also eligible for a 203(b) mortgage with a repair escrow. It is important to note that the buyer must accept the repair escrow and should add the amount of the repairs to the offer price IF he or she is financing the purchase with an FHA 203(b) loan.

The repair escrow is an account established upon the closing of the purchase of the home for the amount of the repairs on the property. It is the lenderís responsibility to inspect and distribute the monies as necessary within 30 days of the close of escrow. These costs and repairs are included in the buyerís loan amount and become part of the monthly house payment. Offers from buyers with other-than-FHA financing such as VA loans, conventional mortgages or cash buyers are also acceptable for this type of property.

These properties may sell for a discount from market price due to the repairs needed. However, these properties may not be available for financing through Conventional Lenders due to the repair escrow. Also, not e that HUD DOES NOT allow repairs to be made prior to closing without written consent. Doing so could void one contract

3) Uninsurable property (UI).

An uninsurable property are homes generally needing extensive repairs and deemed by HUD as not eligible for FHA insurance in their as-is condition. Other-than-FHA financing is required. However, HUD will permit the purchase of certain properties with FHA 203k loan financing (rehab mortgage where a lender may finance the repairs of the home into the mortgage).

These properties sell for the largest discount. Most of these homes are sold as "all cash" offers or through FHA 203k loan financing. These homes are generally not available for financing through conventional or VA financing due to their poor condition.

When a HUD foreclosure is first listed, bids are accepted within the first 10 days are restricted to owner-occupied buyers only. Owner-occupied buyers may make a bid within the first 5 days. HUD will generally award the home to the bidder with the highest acceptable net amount to HUD.

If there are no acceptable offers to HUD within the first 5 days, the bidding process on the home will be opened up on a daily basis for a period of no more than 5 additional days. At the end of each day within this time frame, HUD may select the highest acceptable net owner-occupied offer. This does not include weekends or federal holidays. At the end of this 10 day period and the property has not sold, HUD will review all the offers received during this time frame. If any acceptable investor bids have been received and no acceptable owner-occupied bid was received, the highest acceptable net amount from an investor is selected.

Should the home not sell by Day 10, the bidding process is opened up to all bidders on a daily basis. This includes weekend bids (which open up on the following business day). Again, the highest acceptable net bid is accepted. If after 45 days and the property remains unsold, a lower minimum acceptable bid may be established.

Should an owner-occupant bidder submit multiple offers on several properties, HUD will consider the offers as follows: If the buyer is the sole acceptable offeror on a single property, that bid will be awarded without consideration to other offers. Otherwise, the offer that provides the greatest net return to HUD will be awarded. Should multiple offers be made on a single property the offer with the highest net amount to HUD will be awarded.

All HUD homes are sold on an "as-is" basis. In other words, what you see is what you get. HUD will not make any repairs or warranties on the properties unless noted with a repair escrow. Furthermore, HUD will not guarantee the condition of any house.  

Therefore, it is advisable for any buyer to have a professional home inspection on the home.  If an offer is accepted, the buyer has 15 days to complete any inspections.  It is important to note that should the utilities need to be turned on; any expense incurred is the buyer's sole responsibility.  Also, should a buyer find any defects in the existing home, HUD will not pay for any needed repairs.

All offers are made through HUDís electronic bidding. Before bidding your Realtor must be a HUD registered Real Estate Broker. After working out a purchase offer with you, they will enter your offer into HUDís electronic bidding system. If your offer is the one that is selected, they will notify you.

Earnest Money

Before any offer is submitted to HUD, the buyer is required to deposit with the HUD registered real estate broker an earnest money deposit.

Find out how this works...


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