Get Pre-Approved

The first step in finding a HUD home is to get a pre-approval letter from a Mortgage Lender. Not only does it help with determining prices of homes to view; it is needed in order to submit a bid to HUD. If you want help getting pre-qualified I work with the best lenders in town who can do it for FREE.

Find a HUD Home

The second step is finding a HUD Home that you want to purchase. HUD homes generally move quickly. So if you find one you like you need to submit a bid 48 hours before the bid deadline with a HUD registered broker.

Submit your HUD Offer

To submit an offer on a HUD home, HUD requires three things from the buyer. First off you must submit your offer or bid with a HUD registered broker. Not all agents are registered with HUD. Second they require earnest money in the form of a money order made out to HUD in the amount of either $1,000 or $500. If the total purchase price is over $50,000 then the earnest money is a $1,000, if the total purchase price is below $49,999 then the earnest money is only $500. Lastly is a Pre-approval letter from a reputable lender. If you submit an offer during the Owner Occupant period you agree that you will live in the property for one year, if you buy the home during the investor period as an investor HUD puts no restrictions on occupying the Property.

HUD Bidding Process

When you submit your offer it is similar to any other auction. But it is done electronically, through your HUD registered broker. HUD will take the best and highest offer during the bidding period. On new listings the bidding time period is 10 days for Owner Occupants and for re-lists and price reductions the bidding period is only 5 Day for Owner Occupants. If no bids are accepted then HUD will open the bidding up to investors and Owner Occupations.

Winning Bid? What next?

Once the winning broker bid is accepted, the Broker has 48 hours from time of posting on the internet to deliver the contract and all addendums to Southwest Alliance.   

Packet must include:

* Fully executed, signed and initial contract (all in blue ink)

* Copy of earnest money, cashier's check, or money order (do not send original cashier's check or money order).

* Pre-approval letter from Lender (original or legible fax copy) on lender letterhead, signed by Loan Officer. (Letter should state after reviewing buyers credit, the buyer is pre-approved for the bid amount).

* Information about brokerage service.

Southwest Alliance will e-mail approved signed copy of contract, termite report, and appraisal to broker, within 7 to 10 days. When contract is received, Selling Agent must forward cashiers check or money order to HUD designated Title Company by priority mail or in person, with request for earnest money receipt.

Inspection Procedure

HUD homes are sold "AS-IS", meaning what you see is what you get. HUD homes have a full property condition report assessment done. The property condition report covers the structure, exterior, roof, plumbing, electrical, HVAC, interior, and appliance. However, it is still wise to get a Home Inspection by a licensed professional prior to closing on the sale. The Purchaser has 15 days after the ratification date of the Sales Contract to have all inspections made. The "Home Inspection Policy" and a request form must be submitted to the Property Management Center, along with a copy of the ratified Sales Contract. After receiving permission to do the inspection, the utilities may be turned on at the Purchaser's expense.

Escrow amount for repairs

The Buyer has to finance the repair amount and include it in the winning bid amount at closing and funding. The Lender retains that amount in their escrow account until repairs are completed. The Buyer must get an Invoice from their Contractor for the amount of the repairs made. The Buyer must approve the Contractor's work and release payment to the Contractor through the Lender. No repairs can be done until after the closing and funding. If the Buyer chooses to do their own repairs, HUD will only allow for the Buyer to be reimbursed for materials, not their labor.

Closing

A typical HUD transaction is closed in 30-60 day from the day the contract is accepted by HUD. It may close sooner, but it is dependant on how fast the lender gets the title company figures, and how fast the title company can process the file. It pays to work with a reputable lender who has previously closed HUD homes.

Work with Experience

It will be less stressful if you work with a HUD experienced real estate agent and lender. Together they can get your transaction closed fast! I'm here to answer any questions you may have about the HUD home buying process. Feel free to email me @ leasimpkins@gmail.com