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Buying a HUD Property Number 1

by Tom Nelson HUD Licensed Listing Broker (LLB)

There are as many misconceptions people may have regarding HUD properties as there are questions that should be answered.  The following is a short version of things to know about HUD properties.

What Exactly Are HUD Properties?

When a person buys a home and applies for a FHA backed mortgage at their lending institution the loan is insured by FHA (Federal Housing Administration).  When the home buyer no longer makes payments, the property is foreclosed and becomes property of HUD (The US Department of Housing and Administration).

HUD then contracts with companies to find reputable real estate brokers to list the property. The Broker then inspects the property on a regular basis as well as to market and provide information on the property.  This includes, but is not limited to: MLS listing sites, Open Houses, Buyer Education outreach seminars, Signage, Real Estate Training Sessions, Various web and social market places.

Can an Individual Buy Direct from HUD?

No, an individual cannot buy direct from HUD.  Buying a home is a very complicated process that involves safety protocols as well as following legal guidelines that include fair housing, and other important protections of the public.  Consequently, HUD only allows buyer’s to be represented by HUD approved selling brokers.

Are HUD Homes of Lower Quality?

NO , this a common misconception.  HUD homes can be of any quality, style and size.  They range from small single bedroom homes to very large homes of several floors with multiple bedrooms and baths.  They can be of brick, aluminum, stone, vinyl wood or any type of construction.

Can I buy a HUD Home For Less Than Its Listed?

Maybe.  HUD homes are priced based on the LLBs BPO (Broker Price Opinion) along with an appraisal from a FHA appraiser.  Just as some homes that are not HUD homes sell for less or more than they are listed for; so too do HUD homes sell for more or less than listing price.  Your Realtor can advise you on this.

Does HUD Provide Title Insurance Like Other Home Sales?

NO!  The no is capitalized and emphasized with an exclamation mark.  This is because title insurance is very important.  As a buyer you will have to purchase your own title insurance in addition to purchasing a title policy for your lending institution. This means that you should buy two policies of title insurance to be protected.

If I buy a HUD Home, Do I have to Live In It?

Yes-If You Buy It As Your Residence, and not as an investor.  (Investors do not have to live in the home.) The purpose of the Federal Housing Administration (FHA) is to provide homes for people to live in.  Therefore, an owner occupant purchaser is required to live in the home for at least one year at the time of this writing.

Can I Buy a HUD Home as an Investor and Not Live in It?

Yes.  But Investors cannot buy a HUD home for at least the first 15 days that the home is on the market.  This is to allow someone who wants a home to live in a home to have the opportunity first.  If, after being in the market with no acceptable offers from a buyer who wants to live in the home, HUD  may allow investors to buy the home.

We hope the above information was useful.  Please look for the next BUYING A HUD Property Number 2 to be posted soon.

Copyright Tom Nelson DASAT Properties, LLC 2022