HUD Homes, any experience?

[cuterlt]

Anyone have any experience buying a HUD home? DH and I have the opportunity to buy one for 50% off the list price because of his employment, under the Good Neighbor Next Door program. We're seriously considering it because we really want a house. I'd love to hear about any of your experiences.

 

[Cheshire Figment]

I have not done it, but understand that basically these are repossession from FHA guaranteed mortgages. I would suggest that you get permission to have an inspection done (by a member of American Society of Home Inspectors (ASHI) or equivilant) prior to making a firm commitment.

HUD homes are sold as-is. You need to know in advance anything (especially major) which might need repairs to really be livable.

 

[neatokimmo]

I almost bought a HUD house 7 years ago. If I remember correctly, the house has to be in a certain condition before it was be resold. The roof on the house I was looking at was bad and the realtor said the gov was putting a new one on.

I've never heard of a 50% off program, that's quite a deal!

 

[strasfamily]

Our first house was a HUD repo. When we were looking for one, most of them had major things wrong with them. You have to remember that the people that lived there before didn't want to lose their house, so they may have done things to it like punched in walls. One house we looked at the owners took everthing out - even the toilets. We finally found one that was mostly in good condition aside from the carpets needing to be replaced, the outside color was lime green, and the garage was sealed off and rooms built inside. Our realtor had to go on a certain day and put in a bid and we were the highest bidder. It was a great starter home for us - we ended up doubling our money when we sold.

 

[Sethsmom]

I only know what I have been told. What I have heard is a lot of the HUD houses suffer damage or theft of fixtures etc. when the occupants are forced to move. I have looked at one and it needed a lot of repair. I think it would be a great deal if you can get one in a good location without it having to have extensive repairs.

I know some people that lose their homes have had unfortunate circumstances and would not normally default but there are some people who just won't pay their bills and expect to live without paying a dime. I see this all the time because I work in the court system and you would not believe the people who think that they don't have to pay their rent or mortgage. The next thing you know they are calling because a sheriff has come to them with eviction papers and want to know how long they have to get out. Some of them get put out and move right back in. In the cases where people just don't want to pay, that is usually where the damage come in.

With that being said, you may have to look at quite a few before you find one that has been kept up and not been damaged or had fixtures removed.

Good luck with your search.

 

[ceecee]

My dad actually worked for HUD and inspected these houses. They were sometimes in very disrepair. He bought a few and "flipped" them (before flipping was the thing to do!). I do remember one time, he went to inspect a home and came home with fleas all over him, he had to undress in the garage. Once he said the toilets weren't working so they used the bathtub instead. They had people they used to come in and clean first and others to do the basic repairs. My aunt bought one and it was a great little ranch home that was perfect for her. Before they resell the repos, certain standards (government) have to be met, I'm not sure how it all works. Something you should look into though, I've never heard of 50% but it sounds really good, what kind of interest on your loan are you looking at? I can't imagine them selling them at half the cost or is this "as is" in the disrepair state?

 

[cuterlt]

The 50% off is part of the Good Neighbor Next Door program, which allows police officers, teachers, firefighters, EMTs, etc. to purchase through HUD in "revitalization" areas. You have to promise to live in the home as your primary residence for 3 years, and have a "ghost" second mortgage for that three period. Then that comes off and you can do whatever you live. The few homes in my area that have come up as being eligible have had disclosures about stuff missing, but also escrow money to fix or repair carpet, appliances, etc. They also talk about a 203 loan to fix up the property/home.
http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndabot.cfm
The biggest problem *I think* is having time to fix up a place and live in it at the same time. We both work a lot of hours, but I would love to have something that we have made our own....

Oh and the 50% off is from the appraisal price, from what I understand. We haven't gotten as far as the pre-qualifying for a mortgage step yet - we are a bit away from that.
Thanks for all the help!

 

[jenwimett]

Anyone have any experience buying a HUD home? DH and I have the opportunity to buy one for 50% off the list price because of his employment, under the Good Neighbor Next Door program. We're seriously considering it because we really want a house. I'd love to hear about any of your experiences.

I am a licensed real estate agent in NY and certified to write HUD offers. I know a lot about these houses and have first hand experience in helping my client acquire them. Here are some tips....

1. HUD houses are in as is condition and HUD will perform no repairs.
2. If you buy a HUD house with an FHA loan you will be required to have money in escrow waiting for any repairs to be done.
3. Make sure you have an experienced HUD agent writing your offer as the paperwork is very difficult and is easy to make a mistake on. This may cost you the house.
4. HUD wants you to be ready to close. 45 days is there ideal time frame. Make sure you have a bank ready to run.
5. You must be qualified through a Bank not Mortgage Broker and supply a letter to support that
6. Depending on what state you are in HUD does there bidding auction style and you will need a Real Estate agent to place your bid.

These are important tips off the top of my head. There is a lot of Red tape with HUD. I think the most important thing you can do is get an experienced agent to help you through the process. Yes, they can be a good deal as long you understand the work that is involved.

 

[Blondy876]

I am living in a HUD house nightmare right now. We bought our house almost 4 years ago and it was our first home. We had an agent we really trusted who, when we said we were going to hire a home inspector, told us there was no reason because HUD homes had to pass inspection before they could be put on the market and that this house had passed inspection. It wasn't until we had signed all the papers at closing that we received all the inspection reports. The electric report stated that there was trouble with that, the septic cert. said the same thing. Then when we got to the house 2 hours after closing we found an active termite infestation. We had to live with my in laws for almost 6 months before the house was in livable condition. Plus our biggest problem didn't become apparent right away. The basement had several rooms in it. We tore all the walls and floors out, stripped it to the cinder block walls, that's when we found the 1 inch crack the ran the length of the wall and the wall bowing in. It's a very expensive mess. However, on the plus side, once we get everything fixed (including the thousands that it is going to cost to fix the foundation) we will make a nice profit. We bought the house at $78,000 and once it is all fixed up we should be able to sell for about $200,000. I am sure that when the day comes that we sell and I get a check with several zero's on it I will be grateful but right now, ugh, it's just a stressful, expensive mess.

My advice, be smart. A HUD home can be a good thing if you go into it with your eyes wide open and know what you are getting into.

And before people start posting and pm'ing me to tell me how stupid we were for not having our own inspections, yada,yada,yada, I already know. Nobody can say anything that makes me feel stupider than I already do for buying this money pit.

 

[TammyAlphabet]

Our first home was a Hud home. We had a good experience mostly. After close we had the water turned on and the pipes under the house were leaking. We got that fixed and the heating and air went out. Well, long story short, anything can go out on any house you buy so that is not really an issue. But, we did have an FHA mortgage on the house and so in order to qualify for the FHA mortgage, the house does need to pass an inspection. We sold the house a few years later and did make a little money, but not much.

 

[hiwaygal]

I can see there have been a lot of negative experiences with HUD homes, so I thought I'd throw in my 2 cents since mine was relatively very positive.

I bought my HUD home in 1996. I got it for $10k less than assessment and it was only 3 years old. Yes, it was a repo but there was no damage done by the previous owner. I believe you get or can get a homeowners warranty that will protect you if you have any major problems (water heater, etc.).

I had to pay $1000 in earnest money when I submitted my written offer. But, because of some first time homeowner incentives, and rental credit, I got all but $30 back at closing...so I ended up making a $30 down payment on my house!

There have been a few problems with the house, but they were the fault/negligence of the builder. And nothing that a typical home inspection would have caught (insufficient water protection around the back door, wiring that just meets code but isn't exactly ideal, stuff like that).

I've lived in my house 10 years now. And the only "major" issues have been the ones I mentioned in addition to regular upkeep and maintenance. In that time, my house has literally doubled in value.

I had a great real estate agent and a not so great mortgage broker (not sure if that has changed since I bought my house). I came into homeownership not really knowing anything. I have never regretted my decision.

HUD homes can be fantastic deals and a great way to start on your way to the "great American dream"

 

[ksloane]

Is there some place to know where HUD homes are available? I'm a teacher so I'm guessing I'd qualify for this Good Neighbor program? Not quite ready to buy yet; I'm working on paying off my debt first..my car will be paid off in a year so this is when I'd be ready to even officially start looking, but I wouldn't mind if there was a place online to browse for now...

 

[cuterlt]

If you go to the HUD site that I linked to above, you can look at listings by state. It really is a nice site, and you can look at what HUD (I guess) has documented as the problems with the house. They also have the addresses, so you can go look at the neighborhood too.
Let me know if you end up doing something.
And thanks everyone for the information. It is very helpful.

 

[kami2199]

I am a licensed real estate agent in NY and certified to write HUD offers. I know a lot about these houses and have first hand experience in helping my client acquire them. Here are some tips....

1. HUD houses are in as is condition and HUD will perform no repairs.
2. If you buy a HUD house with an FHA loan you will be required to have money in escrow waiting for any repairs to be done.
3. Make sure you have an experienced HUD agent writing your offer as the paperwork is very difficult and is easy to make a mistake on. This may cost you the house.
4. HUD wants you to be ready to close. 45 days is there ideal time frame. Make sure you have a bank ready to run.
5. You must be qualified through a Bank not Mortgage Broker and supply a letter to support that
6. Depending on what state you are in HUD does there bidding auction style and you will need a Real Estate agent to place your bid.

These are important tips off the top of my head. There is a lot of Red tape with HUD. I think the most important thing you can do is get an experienced agent to help you through the process. Yes, they can be a good deal as long you understand the work that is involved.

All great, experienced advice - take it if you are seriously going to put in an offer. Now, as far as the problems you are hearing about with HUD homes, quite frankly, you can have these problems with any home. It is always best to get a qualified home inspection, know the problems ahead of time.

HUD homes and any other REO home typically has more potential for damages/repair issues but are often sold under market. In my area, there is a stigma attached to these homes and that is part of the reason. Not all REO/HUD homes have problems and not all "regular" listed homes are in the best condition repair wise. Look at it as if you were buying any other home as far as the condition/inspections are concerned. You'll ultimately have to make the decision whether or not you want to put the time and money into it if it does need a lot of repairs. Its the paperwork/process that is going to be different. Oh-these homes are typically sold as-is as others have stated so you won't be able to ask for repairs/etc. in the agreement as you might other homes. Good luck!