HUD Home Purchases in 2013

While the days of getting a house at a steal of a price might be gone it doesn’t mean there aren’t opportunities for home buyers today. Ever hear of a HUD home? HUD stands for (Department of) Housing and Urban Development. These are homes owned and sold by the government. They work a little bit differently than your standard real estate transaction and I’m going to show you the ropes of HUD’s.

HUD’s work on a bidding system versus offer system and owner occupants get first shot at a HUD before an investor. In a standard real estate transaction you write an offer and present it to the listing agent of a property. The seller then reviews all offers that might be on the table and makes a decision as to which offer they’ll accept. Negotiations can take place in order to determine the winning offer.

Why choose a HUD home versus a standard home? HUD homes are typically far under market value. They are specifically designed this way! When running comps on HUD’s you’ll typically find them somewhere between twenty and thirty percent below market value of everything else around them; this includes bank owned property.

In a HUD you don’t make an offer you place a bid. All bids go through the HUD Home Store website. The government will not negotiate the price or the terms; they are final. The government cares about one thing and one thing only – Profit. Since the government is paying the real estate agents the commission they take the six percent off the net amount they will receive. This leaves a net of ninety-four percent as profit which happens to be the exact number they will take on all transactions.

The system works as follows: You’ll have your Realtor place a bid on a property. The bids are set on a timer for the course of seven days ending one minute before midnight on the seventh day. The highest and best bid will win. If the bid is below ninety-four percent it will be rejected. If no bid wins the property then the bidding will continue on a twenty-four hour cycle with all bids due one minute before midnight. All bids are final and you cannot counter any bids nor change your bid after you make it. If the bidding cycle does revert to a twenty-four hour cycle you can then rebid.

I advise my clients to bid ninety-seven percent or higher versus the ninety-four percent in order to maximize the chances they’ll win the house. If you can’t afford to bid over the ninety-four percent I highly advise looking at a house that is less expensive so you can match the margin that’s necessary to win your future home.

I should also note that with HUD’s you’ll need to purchase your own title insurance, have the property de-winterized for your home inspection, and if closing needs to be extended HUD may apply fees, per day, for doing so. There you have the basics to buying HUD homes from the government! It’s not that much more complicated than standard real estate.

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Marc Bayes is an Associate Broker for the Colorado Dream House Team for Luxury Homes by Keller Williams, DTC. He is an expert in buying real estate in the Denver Metro Area. Do you have questions about buying property? Contact him at 303-619-3052 or Marc@ColoardoDreamHouse.com

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