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2012-05-03 15:28:10
Buying a HUD Home

Many buyers see HUD homes as great options to purchase in the market and I agree.  As good a deal as a HUD home may be there are some hoops to jump through to win the bid after your bid has been placed electronically https://www.hudhomestore.com/HudHome/Index.aspx.  

Before you bid on a HUD home 1.  Get pre-qualified, 2.  Find an experienced real estate agent that is or their broker is certified to bid on HUD homes,  3.  Be prepared to make your highest and best offer as low balling a newly listed HUD home only insures that other bidders will win out.

Sometimes HUD has their homes priced below market value and the winning bid will be one that is above list price.  If this happens the information below will provide you with the proper information to bid and win or know when to walk away and bid another day.  Happy House Hunting.  


Regards,

Ben Thorn 

May 2012
 

Over Bidding On HUD Owned Homes

If your offer price is greater than the appraised value for the property, FHA guidelines limit the underwriter to insuring the loan for the lower of two values:

* The Appraised Value

* The Offer Price

If the offer price is higher than the appraised value, your buyer(s) will be required to cover the overbid amount with a cash deposit. The buyer(s) willnot be allowed to build the overbid amount into an FHA loan. 

The initial list price on a HUD owned property is the Appraised value for the property in its “as-is” condition.  

For example, if the property is listed initially for $100,000 the appraised “as is” value is $100,000.  If you bid $110,000, the buyer will have to bring an additional $10,000 to closing. This is in addition to the down payment required by the lender.

HUD's Mortgagee Letter 00-27 requires that the FHA underwriter use the FHA appraisal HUD obtained.  The underwriter can not request a new appraisal; nor can they request that new comps be pulled or the appraisal be updated.

If you are a buyer using FHA financing and you overbid on a HUD home the options available to you are:

1.   Proceed with contract execution.  Verification of the cash reserves available to the buyer to cover the overbid amount will be required before the contract is executed.

2.   Buyer(s) proceed with transaction using cash or conventional financing.

3.    Cancel prior to contract execution.

**Please note, Mortgagee Letter 00-27 applies to FHA financingonly. A conventional lender will have their own set of guidelines that are not governed by HUD. 

For more detailed information regarding Mortgagee letter 00-027 please visit;

https://www.fha-lending.com/CD/Mortgagee%20Letters/2000%20Mortgagee%20Letters/ml00-27.pdf

 
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