Monday, December 9, 2013

The Misconception of HUD Properties

I am very thankful to have started my real estate career on one of the largest HUD teams. That experience has proven invaluable when purchasing HUD properties for my clients, the competition is fierce and I have an advantage, period.  I know the process, inside and out.

Last year, when I began working with investor clients, I quickly realized there was a huge misconception about the term "HUD".  Housing and Urban Development is the agency overseeing several federal housing agencies and their programs, one of which is the Federal Housing Administration (FHA).  The FHA insures home loans in qualified areas of the country to prevent default. In other words, it makes riskier loans a little more appealing to lenders by guaranteeing repayment.  Did that make sense?

The term "HUD property" refers to an FHA home mortgage that has been defaulted on.   
Is an FHA loan from the federal government?
Yes and no.  It's special because it's guaranteed by the federal government.  Meaning, if the loan is defaulted on, the federal government repays (guarantees) the outstanding loan amount to the lender. When the FHA repays (guarantees) the outstanding loan, the property is then owned by the federal government.
What does the federal government do with all those homes it owns?  They sell them - usually at less than market value.  hudhomestore.com is the website where all available federally owned properties are listed for sale.

Are the properties in bad shape?  Sadly, some are.  FHA loans cater to folks who may not have had an opportunity to ever buy a home, so there are many that have been neglected of regular maintenance, others have been absolutely destroyed and still others that aren't in bad shape at all.  Pictures can be very deceiving!  I recommend always checking out the properties in person.  I would love for you to always call me, however, the contact information for the listing agents on each property is listed at the hudhomestore.com website.

Insert personal "worst story ever" from working the listing side of HUD properties.  I had to put my shirt over my mouth in 100 degree heat, and make several trips in and out of a property to take pictures.  It. was. bad.  Trust me.  Fortunately, this type of situation is the exception to the rule.    

There are great deals to be had, for potential flippers/investors and for those referred to as owner/occupants (those that will live in the property for at least 365 days.  Please feel free to contact me if you have questions.  THERE ARE NO STUPID QUESTIONS!  PROMISE.

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