Purchasing a HUD Home

Department of HUD Logo - Copyright HUD

Along with the rise in bank-owned foreclosures has come a rise in properties owned and sold by HUD.  HUD is the Department of Housing and Urban Development, an executive branch agency run by the federal government.  HUD is the department that runs the Federal Housing Administration, better known as FHA.  Any recent buyer or seller of real estate will surely attest to the importance of HUD and FHA in these tough real estate times.

When a homeowner with an FHA-backed loan defaults, the house is typically taken back by HUD, not the bank that serviced the loan.  This really doesn't mean much to potential buyers, but it is important to work with an agent that understands how the HUD process works.

Dealing with HUD is quite a bit different than dealing with a traditional seller, and is even different than dealing with one of the large banking institutions (i.e. Wells Fargo, Bank of America, Citi, etc..).  The most notable difference is that HUD accepts offers based on a bidding system.  This leaves very little room for negotiating, and typically forces buyers to offer their strongest bid right away.

Another major difference with HUD properties relates to pricing.  A common tactic used by HUD is to under-price a home.  A buyer may think that, at the list price, they would get a great deal.  However, if the home is under-priced, it will often times sell well above the list price.  This is important because if the buyer really wants the home, they may have to offer above list price.  In today's tough market, it is very hard to convince buyers that they should be offering above a list price.

There is one area where HUD properties are very similar to ordinary foreclosures.  There are certain things that are non-negotiable with HUD.  For example, if the water is turned off at the property (which is typically the case for HUD properties), the cost is borne by the buyer.  In a normal sale, you might be able to negotiate to have the water turned on at the seller's expense.  When dealing with HUD properties, these kinds of costs are almost always paid by the buyer.  This is something to keep in mind when determining how much to offer.

There is a lot more that could be said about HUD properties, but I think this is a good start.  And as always, if you have specific questions please reach out to me.  I have dealt with several HUD properties and I can help to seamlessly guide you through the process.

GUEST POST: Watch Out for Mortgage Modification Scammers!

Our guest blogger is Jon Wagner, home mortgage loan originator with Wintrust Mortgage in Eagan.  You can find more information about Jon here.

 In the last few years, companies have popped up that offer homeowners "forensic loan audits."  They say they will review the homeowner's mortgage loan documents, establish whether the lender complied with federal and state laws, and speed up the process of requesting a loan modification.

The truth is that even if the audit reveals errors in the loan documents, the process very rarely results in a loan modification or rescind.

Even worse, scammers will often make false promises that they will secure a loan modification, a principal reduction, or have the loan fully rescinded.  They they just the string the homeowner along or simply disappear.

Thankfully there are a few things you can do to best protect yourself:

• Don't trust anyone who guarantees results.
• Don't work with anyone who ask for an upfront fee.
• Don't sign any contracts under time pressure and don't sign any that you don't understand.
• Don't stop paying your mortgage, even if they tell you to.
• Don't give anyone your personal financial information, except an appropriate loan help organization.

Fortunately, free and legitimate help is available from the not-for-profit Homeownership Preservation Foundation.  Call 888-995-HOPE or visit their website for more information.  The U.S. Department of Housing and Urban Development (HUD) also lists by state legitimate housing groups that can help homeowners.  You can view that list here.

And of course, we're always here to answer any questions.

Respectfully,
Jon R. Wagner
NMLS: 331960
Company ID: 1048 

p.s.  Are you thinking of taking advantage of today's affordable home prices and historic-low mortgage rates to upsize, downsize, or refinance?  Please call or e-mail us now to discuss your situation.

Foreclosure Notices Drop Sharply

Via Peter King at MorgageLoans.com:

Foreclosures tumbled in April, with the number of homeowners receiving initial notices of default down by 25 percent from their March level.  New figures from the HOPE NOW Alliance indicate there were 163,000 foreclosure starts in April, down from 217,000 the month before.

This is good news for the overall health of the housing market, but I wouldn't read too far into these seemingly positive figures.  There is skepticism that banks have been processing foreclosures at a slower rate in light of the "robo-signing" scandal, and that they will pick up the pace once they settle with the Department of Housing and Urban Development (HUD).  Also, although the number of foreclosure notices is down, the data indicates that the number of mortgage delinquencies has remained steady, with 2.66 home loans at least 60 days past due.