{"id":5782,"date":"2018-03-31T08:00:57","date_gmt":"2018-03-31T12:00:57","guid":{"rendered":"http:\/\/camerondirect.com\/?p=5782"},"modified":"2020-08-17T13:44:07","modified_gmt":"2020-08-17T13:44:07","slug":"hud-home-tips","status":"publish","type":"post","link":"https:\/\/realestatewealthnetwork.com\/blog\/hud-home-tips\/","title":{"rendered":"HUD Homes 101: What Every Real Estate Investor Needs To Know \u2013 Part 2"},"content":{"rendered":"

Welcome to Part 2 of HUD Homes 101: What Every Real Estate Investor Needs To Know<\/em><\/p>\n

In Part 1<\/a>, we went over what exactly HUD homes are, how they\u2019re located, the bidding process and the importance of the Proof of Funds letter. (By the way, those POF letters are provided in my REI Trifecta program, click here to check it out and start generating your own verifiable proof of funds letters now!<\/a>)<\/p>\n

In part 2, you\u2019ll learn about the inspection period, gaining access to the property, closing the deal (so you can get paid), as well as must-know information about working with Realtors.<\/p>\n

Are you excited?<\/p>\n

Let\u2019s get going\u2026<\/p>\n

Pricing Your Bid<\/strong><\/p>\n

So, you\u2019ve found a HUD home you\u2019re interested in\u2026<\/p>\n

Now how should you calculate the percentage of the bid of the asking price?<\/p>\n

Well, for me, I believe that 82% of asking is a safe place to start.<\/p>\n

If 82% of asking isn\u2019t low enough to make the deal work for you, then you really have 2 options. They are 1: Move on or 2: Keep an eye on it because if it doesn\u2019t sell, HUD will lower the price.<\/p>\n

While this\u201c82% rule\u201d is a reasonable place to start, it may vary in your particular market. This is another one of those things that you\u2019ll learn to dial in on as you go along!<\/p>\n

Your Offer Has Been Accepted!<\/strong><\/p>\n

We\u2019re now at the point where your HUD home offer has been accepted.<\/p>\n

What\u2019s next?<\/p>\n

There will be an inspection period, after which you\u2019ll have 35 to 40 days to close. Because of the way our Proof of Funds letter is written, the very specific and carefully chosen words in it, your offer will be viewed as a cash offer<\/strong>. This differentiates your offer from any others that include third party financing. Your offer is superior.<\/p>\n

This is important because it gives you massive LEVERAGE.<\/p>\n

Most lenders require a 5, 7, sometimes even 10-day inspection period. At the end of that time, you have the opportunity to either accept or decline that property.<\/p>\n

Because you\u2019ll have already inspected it\u2014after all, you already know you want to buy it\u2014you can take advantage of this time to search for your buyer, assuming you plan to wholesale it. If you\u2019re unable to find a buyer during the inspection period, you can simply walk away from the deal and take back your earnest money deposit, stating that the property is unsatisfactory.<\/p>\n

One quick way to find cash buyers is to use the Cash Buyer Data Feed. It provides you with cash buyers across the entire country, including your area, and offers advanced filters to help you pinpoint the exact type of buyers you are looking for. Run a FREE search here!<\/a><\/p>\n

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Importance of Your Realtor<\/strong><\/p>\n

During this process, you\u2019ll want to lean on your real estate agent.<\/p>\n

When they understand that this is not going to be your last (or only) deal, they\u2019ll be in your corner supporting you! You become an extension of them, and them of you. It\u2019s a partnership that is highly valuable to both of you.<\/p>\n

Different regions of the country may handle HUD deals differently. Your agent will know this \u2013 just one more reason your working relationship is so valuable.<\/p>\n

That Realtor NEEDS to know that you\u2019re in business and may be making many HUD purchases in the future. To them, that\u2019s like an annuity!<\/p>\n

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

At closing time, when you\u2019re wholesaling, there\u2019ll usually be 2 closing agents.<\/p>\n

HUD typically prefers that you work with their<\/em> choice, and the buyer will probably want to work with theirs. I experience this type of situation all the time and it\u2019s no problem, but it\u2019s easier when the same closing agent handles both transactions.<\/p>\n

HUD may require that the buyer\u2019s (your) funds be in escrow prior to close, which runs outside the parameter of the funding we provide but\u2026in spite of this, we do this quite often under a couple of different scenarios\u2026<\/p>\n

ONE - is if the local office agrees to the funding arriving on the day of closing\u2014which often happens when we push back a little bit.<\/p>\n

SECOND - is when your buyer\u2019s funds are in escrow and all their documents are signed and held by the closing agent. This means there\u2019s no additional risk<\/strong> to us by sending the money in a day early, since the transaction is nailed down. When that\u2019s the case, we\u2019ll go ahead and fund even if it\u2019s the day before, just as a matter of routine. Try that with another transactional funding source!\u00a0 Then ask them to do it with NO fees like we do.<\/p>\n

If we wire the money today and the transaction happens tomorrow, but because of time zones we don\u2019t get the money back until the following day\u2014that means the money is actually out for two days. That\u2019s a BIG no-no in the transactional funding world.<\/p>\n

Given this particular scenario, we can work with that type of situation with some extra planning.<\/p>\n

The main thing to ensure is that we\u2019re protected, and that the transaction is set in stone.<\/p>\n

>><\/strong>For more information on our funding and how you can get access to $1,000,000 for an unlimited number of transactions, click here now!<\/a><<<\/strong><\/h3>\n

Getting Access to the Property<\/strong><\/p>\n

Getting the buyer in the property used to be a stumbling block for me because I couldn\u2019t see how it would work.<\/p>\n

But\u2026it\u2019s really very simple.<\/p>\n

Pro Tip: <\/strong>It\u2019ll be useful if you have a good relationship with the agent you\u2019re working with!<\/p>\n

One way is to put language in your agreement that provides you with access to the property prior to closing in order to show it to potential contractors, rehabbers, and so on. Your agent can help you with this wording.<\/p>\n

Or, you can get the Realtor to give you the key! It depends on your market and the agent you\u2019re working with, but generally speaking, HUD has their own lockboxes and they re-key the houses to each region or city. Periodically they will change them out.<\/p>\n

I have one realtor who handles HUD homes in my area, and he mails me the new HUD key when they change it. There\u2019s no way he wants to drive 3 hours round trip just to show me these houses!<\/p>\n

In my experience, I find there are usually 2 types of Realtors:<\/p>\n