What is HUD?

What is HUD?

Be advised that HUD is a government agency. The Department of HUD is the Department of Housing and Urban Development. HUD exists to help low income families buy homes. HUD purchases distressed properties from lending institutions, inspects them, and places them up for auction.

Anyone can bid on a HUD home. Even investors who intend on renting it out or flipping it can submit a bid. But HUD will give priority to bids from buyers who intend to own and occupy the home themselves. Again, HUD exists to help low income families afford homes, not to help investors get rich.

Most HUD homes need repairs. As I stated earlier, the homes are inspected. The inspection report is made available and will disclose what repairs are needed. If the inspector estimates that needed repairs will cost more than $5000, FHA will not insure the home. That is important because many low income families must use FHA loans in order to purchase a home. If the buyer plans to use FHA, the home must meet FHA requirements.

If the buyer can qualify for conventional financing, FHA requirements are not a concern. However, all lenders require homes to meet certain standards before they loan their money to buyers. Furthermore, there are loan programs available to buyers that will allow them to borrow enough money to cover paying for the house and the repairs. This is called 203(K) financing.

When HUD accepts a bid, the buyer is required to deliver, within 48 hours, the written offer, all accompanying documents, and earnest money in certified funds. Any time a government agency is involved, you can count on complications. Buying a HUD home is no exception. A buyer will need to use a realtor. A realtor can lead you through the process of:

• placing the bid, then (if the bid is accepted),

• delivering the offer with all documents, then

• guiding the transaction to closing.

Whatever you may think about realtors (and I used to be one, so I've heard it all), they are invaluable when it comes to navigating your way through a HUD transaction.

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