Come with us to view a HUD home for sale.
We leave the office with a really good light because the utilities are turned off in these homes (you have to make sure your mortgage lender understands this). When we arrive at the home your NJHomeBuyer.com Realtor will enter first. Try to make note of the repairs that need to be done because although you have the right to a home inspection your contract with HUD will not be contingent on you receiving a satisfactory report. If HUD has arranged for a home inspection to be done - that report will be available to you. Also, note that you must have a mortgage lender that accepts that the home is being sold in 'as is' condition and that will not request repairs. HUD will not do repairs and the buyer is not permitted to prior to settlement. (Although, see the information on the FHA Insured vs Uninsured page and the information on the "203k and rehab loan" page)
What does it mean to say a house is in poor condition? Most of the time it does not mean that the house will cost a fortune to make habitable (What is a 'fortune"?). It often does mean that there is a need for a lot of cosmetic (repainting, new carpet, minor maintenance, cleaning) repair. Some investors have learned that the 'good deal' comes in the form of a house needing heavy cosmetics and the need to get rid of that terrible animal smell in the carpets. Smells are powerful in their ability to drive away buyers. Investors know that this will result in a decreased price and a 'deal'.
If you are interested in the HUD home you still need to know what
other homes are on the market in the area. You might find a similar
house down the street for sale that is priced less that you don't have
to bid on. HUD homes can be a good deal but there might be a better
deal if you at least check to see what is available. Winning a HUD bid
is not good if you have to pay more than the house is worth to do it.
For bidding information go here.
Not all HUD homes are in poor condition. If the home is insured for FHA financing it means that the FHA appraiser has estimated that repairs needed to make the house meet FHA guidelines should cost no more than $5000. Although that may leave quite a lot of room for imporvement some of the homes are in virutally move in condition. The prevalent belief that since the homes were foreclosed the prior owners that lost the home trashed them is very wrong. It is rare that they did intentional damage. They went through a time in their life that was very difficult. They were unable to pay their mortgage. That does not make them vandals.
Since the owners were in difficult financial and possibly personal circumstances there often is a fair bit of 'deferred maintenance'. That means they didn't have the financial or emotional means to put money into the home to do needed repairs.