HUD-owned properties are homes there were acquired by HUD (US Department of Housing and Urban Development) by mortgage default on an FHA-insured mortgage. HUD offers the properties for sale that they have obtained through foreclosure to recover their loses from the defaults.
Greater denver has HUD-owned foreclosures in all neighborhoods, in every price range in many conditions (turn-key to gutted). A HUD-owned property can be anything from a single-family home to 4-unit residential building. The process of buying a HUD home is different than purchasing process that is standard in Denver.
Here’s what you need to know:
- HUD Homes are first offered to buyers that will live in the property as their primary residence, owner-occupants. This exclusive listing period for owner occupants can vary from five days to 30 days depending on the amount of repairs the property needs. After the exclusive listing period if no bids have been received by owner occupants HUD will open bidding to non-owner occupants, investors.
- During this owner occupant exclusive listing period HUD will collect all bids from owner occupants before accepting one. They give no priority to the bids that were submitted first. The property is awarded to the bid that will net HUD the highest proceeds.
- If a buyer bids over the list price then the buyer must bring cash to closing for the amount of the overbid. So if HUD has a home for sale for $100,000 and you submit a bid for $103,000 because you really want the house you will be responsible for bringing the extra $3,000 to the closing table. (not including buyer closing costs and down payment)
- When submitting a bid you can ask for HUD to contribute up to 3% of the purchase price towards your closing costs. If you ask for HUD to pay closing costs the amount will be deducted dollar-for-dollar off your bid so don’t ask for closing cost assistance if you don’t want your bid to be lower by that amount.
- HUD Homes are sold AS-IS without warranty or repairs. It’s strongly recommended to get a home inspection on all properties but no repairs will be made by HUD if problems are found. If you get an inspection and find there are more problems than you want to deal with then an owner occupant buyer can withdraw before the inspection period ends.
- A buyer must use a HUD-approved real estate broker to view properties, prepare and complete contracts, and submit Internet bids. When buying a HUD home you really want a professional who is familiar with the HUD buying process.
- HUD homes are in the Denver MLS and are also listed at the HUD Home Store.
- All purchasers must close on or before 45 days of contract acceptance date for normal closings. Cash closings may be 20 days and 203k closings must close 60 days of contract acceptance.
- It’s true that HUD has 1/2 priced houses under the Good Neighbor Next Door Program. There are certain restrictions that apply.
This is the short version of buying a HUD property and it’s strongly advised to discuss the entire process in detail with your agent as soon as you find a HUD home you are interested in purchasing. Each and every one of my buyers that have purchased a HUD home couldn’t be more pleased with their homes but they will all tell you it did take some extra perseverance to get to the closing table. Denver currently has a number of HUD homes available in all neighborhoods and price points – have you considered buying a HUD property?
Vali Hooker
Denver Real Estate Agent
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{ 2 comments… read them below or add one }
Hi Vali,
My husband and I are looking at a HUD home. We have been working with an agent who is not HUD certified but has invested a lot of time with us already. So we are not really sure what to do with that. We want to be fair to her.
We also have NO idea how to make this happen! We love the house but it needs carpet and paint and all appliances. It goes up for auction on July 11th, so we are anxious to move the process forward. What steps do we need to take? And what kind of a bid is reasonable? In short how can we make sure we get this house and stay with in our budget and still have money for home repairs?
Thank You!
Hi Karen,
I’m sure your agent greatly appreciates your loyalty and understanding that the time invested looking at homes together is valuable. Your agent’s office can get HUD certified, unfortunately it won’t happen over night. The approval process can take 1-3 months so the timing won’t work with this particular property that you’re interested in purchasing. Another suggestion is to have your agent speak directly with the listing agent about not being HUD certified. Many of those listing agents will work out an arrangement to submit the bid for your agent allowing your agent to still be involved. It will be a slightly discounted commission to your agent but if it means getting the house, it may work for everybody!
When you say the house goes up for auction on July 11th I’m assuming you mean the open bid period closes and HUD accepts a bid, correct? You will have to have your bid in before then because if there are other offers they’ll be reviewing all offers the day after the open bid period closes. If the house needs cosmetic repairs you will have to be sure and budget for those after you pay for home inspections, dewinterization, your down payment and closing costs. Your agent and lender can help you estimate what those costs will be so you can get an idea if there’s enough money to go around. If you don’t feel there would be enough money for cosmetic home repairs after closing I suggest looking into financing the home with an FHA 203k rehab loan which allows a purchaser to finance the cost of cosmetic home repairs into the loan amount. Like any home loan you would have to qualify for the loan, the home repairs have to be done within a curtain amount of time after close by a professional general contractor but it allows for you to enjoy the home updated within 90 days after close. Keep in mind the HUD home has to be eligible for this type of loan, it will say in the MLS if it is or is not. Make sure you use a seasoned mortgage lender who understands and works with FHA 203k Rehab loans.
Your agent will give you the best advice on the price you should offer by evaluating the market conditions and recently sold comparable properties. HUD homes have been professionally appraised to establish the list price. If the home is in ‘fair’ condition, in an area where homes tend to move quickly you can bet there will be multiple, strong offers so put your best offer forward when submitting your own offer.
Much luck in obtaining this HUD property and please let me know if I’ve answered your questions appropriately!