{"id":5779,"date":"2018-03-16T08:44:40","date_gmt":"2018-03-16T12:44:40","guid":{"rendered":"http:\/\/camerondirect.com\/?p=5779"},"modified":"2020-08-17T20:41:52","modified_gmt":"2020-08-17T20:41:52","slug":"hud-homes","status":"publish","type":"post","link":"https:\/\/realestatewealthnetwork.com\/blog\/hud-homes\/","title":{"rendered":"HUD Homes 101: What Every Real Estate Investor Needs to Know \u2013 Part 1"},"content":{"rendered":"

Today\u2019s post is all about\u2026you guessed it\u2026HUD homes.<\/p>\n

There is much to uncover in this two-part blog series\u2026what are<\/em> HUD homes, what does the investing process entail, how do you find<\/em> HUD homes, etc...But first, let\u2019s touch on the basics of this type of property.<\/p>\n

Simply put, the term \u201cHUD\u201d refers to the U.S. Department of Housing and Urban Development<\/em>.<\/p>\n

A\u201cHUD home\u201d is a 1-to-4-unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD then becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.<\/p>\n

\"\"<\/p>\n

ANYONE, who has the required cash or can qualify for a loan (subject to certain restrictions), can BUY a HUD home.<\/p>\n

If you\u2019ve never dealt with HUD homes, try going online to the HUD Home Store<\/a> site where you can search for these types of properties. This site allows you to search anywhere in the US, which gives you the ability to scale up your business and dive into other markets<\/strong> - something you\u2019ll hear me talking about A LOT.<\/p>\n

My suggestion for you is that if you either aren\u2019t in an additional market or you\u2019re intending to get into an additional market in the near future, get in one NOW. The sooner you expand your horizons, the sooner you\u2019ll grow a truly resilient and scalable business!<\/p>\n

The Bidding Process<\/strong><\/p>\n

Time to dive a little deeper\u2026<\/p>\n

Let\u2019s say you\u2019ve discovered a deal you like \u2013 you\u2019ll subsequently connect with a HUD-registered real estate agent from which you can then make offers.<\/p>\n

HUD homes, however, are FIRST made available to owner-occupants.<\/p>\n

HUD does this because, if the Federal Government is going to take a hit on the property from having insured it and turning it into a foreclosure, they figure that any kind of bargain or savings that comes along should first be offered to owner-occupants.<\/p>\n

After all, HUD is<\/em> all about the American dream of homeownership.<\/p>\n

After being offered to the owner-occupants\u2026 some of them are offered to police officers, firefighters and teachers at 50% of the listing price\u2026After that, to HUD-approved non-profit organizations\u2026Then FINALLY, the general public, which includes YOU (the investor).<\/p>\n

Some investors get discouraged by this process, thinking if they\u2019re offered to everyone else first, then all we get are the scraps!<\/em><\/p>\n

In a way\u2026that\u2019s true. We get what owner-occupants DON\u2019T want.<\/p>\n

However\u2026<\/p>\n

The Uninsurable<\/strong><\/p>\n

HUD homes that will not sell to an owner-occupant are when they are labeled uninsurable<\/em>. This means HUD is unwilling to insure a new mortgage on this property; usually due to the condition of the property.<\/p>\n

Simply put\u2014they won\u2019t insure junkers. And it\u2019s junkers that we WANT.<\/em><\/p>\n

If HUD will not insure it, then the bank will not lend on it.The uninsurable HUD homes are the ones we want to go after.<\/p>\n

The Waiting Game<\/strong><\/p>\n

There\u2019s no avoiding it\u2026in many cases you\u2019ll have to wait a while for the price of the home to come down to where it makes sense for us. When that\u2019s the case, it\u2019s a process; a waiting game. Other times the initial asking price works.<\/p>\n

Case in point\u2026<\/p>\n

One time, I found a HUD property that I liked and decided to make an offer on it. But\u2026I was outbid.<\/p>\n

If there\u2019s more than one bid, and the higher bidder meet\u2019s HUD\u2019s minimum takes the cake (that\u2019s assuming that they\u2019re qualified, have proof of funds and can back up that proof of funds.)<\/p>\n

What happened in this instance is that the other buyer who made the offer couldn\u2019t perform and ended up cancelling the contract. It went back on the list, and so I jumped back in and made another offer.<\/p>\n

Patience is a virtue, huh? You never know what twists and turns will happen in investing!<\/p>\n

But, remember this\u2026<\/p>\n

One thing you have<\/em> to watch out for is fees and closing costs. You may be offering $102k, but the deal could actually end up costing you $105k or more, all due to closing costs. Make sure that when you place your offer, you understand exactly<\/em> what expenses you\u2019re going to incur.<\/p>\n

Proof of Funds<\/strong><\/p>\n

Of course, you DO have to show proof of funds.<\/p>\n

I offer proof of funds as part of my REI Trifecta program (amongst many other powerful tools and benefits), and I offer 3 Proof of Funds letters too. Click here and learn how to use the REI Trifecta to do more deals in today's market - it's free!<\/a><\/strong><\/p>\n

These 3 unique letters are for:<\/p>\n