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Health & Fitness

Is a HUD home a foreclosure?

Confused by bank owned, foreclosures and HUD homes? This blog article will give you the answers you are looking for.

Is a HUD home a foreclosure?

Yes a HUD home is a foreclosure that is owned by Fannie Mae and Freddie Mac. When you hear the terms bank owned, lender owned, company owned, corporate owned and REO properties they too are foreclosures. The difference with that list of properties is they are owned by a lending institution. All of these homes had an owner who fell behind in payments and lost their home to foreclosure. When you see a HUD home for sale remember this, it is owned by Fannie Mae and Freddie Mac. The homeowners that lost the home had an FHA loan on the property and that's how it ended back in the hands of Fannie Mae and Freddie Mac.

 

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How is a HUD home different from other foreclosures?

A HUD home has a different set of rules that govern the sale of these properties. Most of the HUD homes have a stipulation that says they will not look at any offers for the first 7 to 10 days that the home is on the market. If you see a HUD home on the first day that it's on the market and wish to write an offer you can certainly do so. Keep in mind even if you present it on day one they will not look at it until day eight unless it is marked differently on the MLS. This is the government's way of trying to make things fair for everybody. They want anyone that's interested in the property to have an opportunity to see the property and make an offer. They are looking for owner occupant buyers and will in many cases not look at any investor offers or non-owner occupant offers for the first 15 days the home is on the market.

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The other thing that's unique to a HUD home is when you have your agent present your offer HUD is only interested in three items. They asked that the home offer is uploaded to their website along with the HUD addendum, owner occupant certificate in the first seven pages of the purchase agreement. If your offer is chosen then they will ask for the complete purchase agreement. It's very important that you work with a real estate agent who understands this concept. If the agent uploads the wrong information HUD may very well reject your offer.

 

Are bank owned homes a better way to go?

Perhaps but every bank does things differently, so it is truly on a case by case basis. Time is of the essence can really matter and then again it may not. A bank can have two different homes for sale on the same street with two different asset managers, both will do things differently. The first home the asset manager may take a look at the very first offer that's presented that's good and work with that buyer. The other asset manager at the same company may sit on the offers until they get five or more and then ask for highest and best. You never know how that asset manager is going to work so when you see a home that you like don't hesitate and write the offer.

Another thing I've noticed recently is that many banks are now underpricing their home to try to get more money than they would have had they just priced it at market value to start with. Some of this is accidental simply because the real estate market is increasing in value quicker at times than they can get a correct value on the property. One thing that both HUD homes and bank owned homes have in common are all of the additional addendum's they will ask you to sign. It's very important that the buyer agent follows the directions to the letter. You do not want any extra marks, whiteouts or changes on the contract. Making any type of change or not presenting all the paperwork they are asking for could lead to your offer being rejected. Time is of the essence and lots times you have one chance to get this right. I can't stress enough the importance of follow through an organization when presenting an offer on a foreclosure.

 

You have to be prepared for multiple offers even on tradition sales in this current market. Feel free to read one of my earlier blogs about how to win in multiple offers. That will help to answer a whole other set of questions. It seems that if the home is in good condition and priced properly it will attract more than one buyer. Many of them will want to write an offer. The other part of this goes back to preparing your best offer the first time. Some banks may not ask for highest and best, they will just counter one offer that is close to where they want their bottom line to be. Don't assume that this is limited to homes in a certain price point. I am seeing this in homes under $200,000 as well as homes over $500,000.

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