Company Name
“Betty is the best! She has helped
us buy and sell four homes — we'd
never hire anyone else.”
—The Greens
us buy and sell four homes — we'd
never hire anyone else.”
—The Greens
ABOUT HUD HOMES
| Northstar Group Realty CRS, GRI co-huds.com 303-257-8000 |
| Northstar Group Realty www.co-huds.com Direct: 303-257-8000 Fax: 720-596-5555 Email: mike1realtor@msn.com |
WHAT IS HUD?
First of all, HUD stands for the Department of Housing and Urban Development. It is
a cabinet position in the Federal Government created in 1965 under Lyndon B. agency
that insures mortgages. The FHA was created during the Great Depression in 1934 to
help homebuyers obtain affordable financing. It is the largest insurer of mortgage
loans in the world and the only government agency that operates solely from its
self-generated income and costs the taxpayers nothing! Oversight of the FHA was
placed under HUD when it was created in 1965.
WHAT IS A HUD HOME?
Very simply put, a HUD Home is any property that once had an FHA mortgage that was
foreclosed, and is now owned by the government (HUD).
FHA mortgages are government-insured loans. The government does not originate the
loan, but just insures the payment of the loan amount to the Lender that extends the
loan, such as Wells Fargo, Washington Mutual, Countrywide or any other Investor that
actually provides the cash to purchase the property. The Borrowers pay a monthly
mortgage insurance premium (MIP) on all FHA loans. Then later if a borrower fails to
maintain mortgage payments to that Lender, the Lender initiates foreclosure
proceedings, the borrower loses possession of the property, and it is now owned by
that Lender. This is also called "Lender-Owned" or "Bank-Owned" property. "REO"
property is a generic blanket term to describe any property that has been foreclosed
and now owned by the Investor. It stands for "Real Estate Owned." Every bank and
lending institution has an "REO Department" that handles foreclosures and
repossessed properties.
Now once a property with an FHA mortgage has been foreclosed and repossessed by
the Lender, such as Countrywide for example, the Lender submits the claim for their
lost money to HUD, in exactly the same way someone would submit an insurance claim
for damaged property or a car accident. HUD then reimburses the Lender for the lost
money that was borrowed from them, but since they are paying for that property they
are now entitled to actually own the property, just like an auto insurance company
that pays a claim on a car that was totalled, is now entitled to the property that was
insured since they just paid for it.
So now that the mortgage claim has been paid off to the original Lender by HUD, the
property now goes into HUD's inventory of REO property, and is now officially called a
"HUD HOME."
WHO MANAGES HUD HOMES?
Each region of the country has various HUD-designated companies that manage HUD
properties. For many years the Colorado region was managed by First Preston, then
since the fall of 2004 it was Michaelson, Connor, and Boul, but now they are all on the
HUD site itself. Their website where all HUD properties may be viewed is
www.hudhomestore.com. All information regarding the buying and selling of HUD
homes along with the current inventory of homes may be found on that site. All HUD
Homes can only be seen and offers for bid placed through HUD-registered Real Estate
Brokers, and good news, we are HUD-registered!
WHO CAN PURCHASE HUD HOMES?
HUD homes are listed once per week each Friday and the property information, price
and list date is posted. Then for the next continuous 10 day period they are available
for viewing and bidding. The deadline for placing bids is at the end of those 10 days,
which is one week from the following Sunday at midnight. Then on Monday morning,
11 days after original listing date the bids are reviewed and awarded if they are
acceptable. Bids are placed online by HUD-registered Brokers and awarded bids are
posted on the website by about 2:00pm on that Monday. For this first 10-day period,
only Buyers who will be owner-occupants may bid on HUD properties, to help
homeowners obtain affordable housing. If after that 10-day period there is no
acceptable bid by an owner-occupant Buyer, they are then opened up to all bidders on
a daily basis, both owner-occupants as well as Investors who may wish to purchase
them, make improvements, then sell them for a profit. Bid results will be posted the
following day until sold.
WHAT RESTRICTIONS APPLY TO HUD HOMES?
In the first 10-day period after listing, only Buyers who will occupy the property as their
primary residence may bid. After that it is open to all bidders.
Buyers declaring themselves as owner-occupants must actually physically occupy the
property, change their address to that address, and remain as occupant for at least 1
year.
People who have purchased a HUD home as owner-occupant cannot buy another HUD
home for 2 years after the purchase of a previous HUD home, even if they fulfilled the
1-year occupancy requirement on the first one.
THERE ARE SEVERE PENALTIES TO BOTH BUYERS AND REAL ESTATE BROKERS WHO
MAKE FALSE DISCLOSURES ON HUD PROPERTIES! The penalty for declaring
owner-occupancy then selling for a profit in less than a year is $250,000 and jail time!
WHAT CONDITION ARE HUD HOMES IN?
Many people associate HUD homes with extremely trashed-out properties. That is not
necessarily so. It is true that many foreclosed homes have not been cared for, and the
evicted owners sometimes intentionally damage the properties out of resentment, and
sometimes even sell anything of value before they are removed from the property.
Often we see holes punched in walls, paint spilled on carpets, broken windows etc.
Some homes have even been stripped of appliances, doors, light fixtures, even
cabinets and plumbing fixtures. However this only describes perhaps 20% of HUD
homes. Another approximately 20-25% of HUD homes are in pristine condition, needing
nothing more than a carpet cleaning. Many have some or all appliances still in the
property. Many HUD homes have had some updating such as a new furnace, new roof,
new windows or new bathroom tile. While only about 25% of HUD homes are in need
of extensive repairs or complete updating, approximately half of all HUD homes are in a
completely liveable condition as they sit, from needing a fair amount of cosmetic
updating to needing virtually no attention at all.
WHAT ABOUT FINANCING?
Any type of financing may be obtained on HUD properties. Buyers are free to choose
any Lender they wish, and may have the property Inspected prior to purchase, just
like in any other Real Estate purchase. The only exception is that some HUD properties
may not be acceptable for FHA-insured financing. This is because FHA-insured loans
require that the property be in completely liveable condition, meaning everything must
be in good working order. So if plumbing fixtures are missing, carpet or flooring is torn
or missing, significant damage such as broken windows, missing doors, inadequate
paint, wall damage etc., then the property will not pass an FHA appraisal, so other
financing will be necessary such as conventional, subprime or cash.
FLOOD ZONES, LEAD PAINT AND OTHER SCARY STUFF
If you go onto the HUD website and view properties and click on the "View Property
Details" link to see the description of each house, you will almost always see a list of
repairs that the property needs. You will also see things like "FEMA Flood Zone X,"
"Lead-Based Paint," "Plumbing nonfunctional due to possible frozen lines," and other
things like that. Are these items of concern? Sometimes, but in many cases not.
Every house listed on the HUD site will say which FEMA flood zone it is in. That does
not necessarily mean it is in a Flood PLAIN, just which FEMA ZONE it is in. We have no
idea why anyone feels this must be listed on the site, especially in the Denver area.
Lead Paint is sometimes mentioned, not because there is lead paint, but because
Colorado law requires that a Lead-based Paint Disclosure form be provided in every
transaction if the property was built prior to 1978. So every home listed that was built
in 1977 or earlier will say "Lead Based Paint" in the details. However, be assured that
very few houses will actually have lead-based paint, since it was not even sold in
Denver since 1964. There is a difference between OIL-Based Paint (Linseed oil being
the vehicle, just as water is the vehicle in Latex paint) and lead-based paint. There is
no inherent danger in oil-based paint which is still sold today, it just poses more
inconveniences (higher price, longer drying time, flammable fumes, difficulty to use,
high odors etc).
IS THERE MONEY IN ESCROW ON HUD HOMES? NO!
On some HUD homes you may see notations like "$3500 repair escrow." Does that
mean there is money escrowed to receive for repairs upon purchase? NO! It is
misleading. All that means is that if an owner-occupant buyer uses only an FHA-203K
rehab type loan, FHA will allow that amount to be placed in escrow to complete those
specified repairs after closing. This is so a buyer can be approved to close on a loan
that normally would not pass an FHA appraisal, for example because of a non-working
furnace or other non-liveable issue. There is never any actual money in escrow, and no
buyer may ever receive any money at closing of a HUD home.
HUD TRENDS
There has been a highly significant increase in the number of HUD properties in the
Denver market over the past few years. Last year Denver led the nation in the
number of foreclosures and HUD properties. That is bad news for Sellers, facing
decreasing home values; but it is great news for Buyers, being able to obtain homes
for literally $50,000 to $75,000 below value in many cases.
Also a trend that has changed recently is that there are so many HUD properties on
the market, HUD has become more negotiable in their selling prices. The Sold-to-List
price has actually decreased over the past 2 years. Since 2005 over HALF of all HUD
homes actually are sold for significantly MORE than listing price, indicating that more
and more people are recognizing the value of HUD homes. Many HUD homes are being
bought for higher than asking price and are still below current market value in most
cases!
HOW CAN HUD HOMES BE BID ON?
Only HUD-registered Realtors may place bids on HUD properties. Good news: we are
HUD licensed! Bids are submitted online and the results will be posted the very next
day for properties in the Investor stage, and at the end of the 10-day period for
Owner-occupants. Once a bid is awarded, we have 48 hours to sign the contract,
disclosure forms & addendums, and obtain the $1000 earnest money check. Then HUD
allows 45 days to close on the property, which may be extended for $25 per day after
that.
HOW NEGOTIABLE ARE HUD PRICES?
HUD bids are not reviewed by human beings like a normal Seller or bank would
evaluate an offer. Everything is computerized, and they have specific formulas to
determine an acceptable bid.
If you are an Owner-Occupant we can find you a great bargain with significant instant
equity! If you are an Investor we can find you dozens of deals with fantastic Return on
Investment!
Click here to see a list of all HUD properties currently for sale. Once on the site,
click Colorado, then search available properties.
First of all, HUD stands for the Department of Housing and Urban Development. It is
a cabinet position in the Federal Government created in 1965 under Lyndon B. agency
that insures mortgages. The FHA was created during the Great Depression in 1934 to
help homebuyers obtain affordable financing. It is the largest insurer of mortgage
loans in the world and the only government agency that operates solely from its
self-generated income and costs the taxpayers nothing! Oversight of the FHA was
placed under HUD when it was created in 1965.
WHAT IS A HUD HOME?
Very simply put, a HUD Home is any property that once had an FHA mortgage that was
foreclosed, and is now owned by the government (HUD).
FHA mortgages are government-insured loans. The government does not originate the
loan, but just insures the payment of the loan amount to the Lender that extends the
loan, such as Wells Fargo, Washington Mutual, Countrywide or any other Investor that
actually provides the cash to purchase the property. The Borrowers pay a monthly
mortgage insurance premium (MIP) on all FHA loans. Then later if a borrower fails to
maintain mortgage payments to that Lender, the Lender initiates foreclosure
proceedings, the borrower loses possession of the property, and it is now owned by
that Lender. This is also called "Lender-Owned" or "Bank-Owned" property. "REO"
property is a generic blanket term to describe any property that has been foreclosed
and now owned by the Investor. It stands for "Real Estate Owned." Every bank and
lending institution has an "REO Department" that handles foreclosures and
repossessed properties.
Now once a property with an FHA mortgage has been foreclosed and repossessed by
the Lender, such as Countrywide for example, the Lender submits the claim for their
lost money to HUD, in exactly the same way someone would submit an insurance claim
for damaged property or a car accident. HUD then reimburses the Lender for the lost
money that was borrowed from them, but since they are paying for that property they
are now entitled to actually own the property, just like an auto insurance company
that pays a claim on a car that was totalled, is now entitled to the property that was
insured since they just paid for it.
So now that the mortgage claim has been paid off to the original Lender by HUD, the
property now goes into HUD's inventory of REO property, and is now officially called a
"HUD HOME."
WHO MANAGES HUD HOMES?
Each region of the country has various HUD-designated companies that manage HUD
properties. For many years the Colorado region was managed by First Preston, then
since the fall of 2004 it was Michaelson, Connor, and Boul, but now they are all on the
HUD site itself. Their website where all HUD properties may be viewed is
www.hudhomestore.com. All information regarding the buying and selling of HUD
homes along with the current inventory of homes may be found on that site. All HUD
Homes can only be seen and offers for bid placed through HUD-registered Real Estate
Brokers, and good news, we are HUD-registered!
WHO CAN PURCHASE HUD HOMES?
HUD homes are listed once per week each Friday and the property information, price
and list date is posted. Then for the next continuous 10 day period they are available
for viewing and bidding. The deadline for placing bids is at the end of those 10 days,
which is one week from the following Sunday at midnight. Then on Monday morning,
11 days after original listing date the bids are reviewed and awarded if they are
acceptable. Bids are placed online by HUD-registered Brokers and awarded bids are
posted on the website by about 2:00pm on that Monday. For this first 10-day period,
only Buyers who will be owner-occupants may bid on HUD properties, to help
homeowners obtain affordable housing. If after that 10-day period there is no
acceptable bid by an owner-occupant Buyer, they are then opened up to all bidders on
a daily basis, both owner-occupants as well as Investors who may wish to purchase
them, make improvements, then sell them for a profit. Bid results will be posted the
following day until sold.
WHAT RESTRICTIONS APPLY TO HUD HOMES?
In the first 10-day period after listing, only Buyers who will occupy the property as their
primary residence may bid. After that it is open to all bidders.
Buyers declaring themselves as owner-occupants must actually physically occupy the
property, change their address to that address, and remain as occupant for at least 1
year.
People who have purchased a HUD home as owner-occupant cannot buy another HUD
home for 2 years after the purchase of a previous HUD home, even if they fulfilled the
1-year occupancy requirement on the first one.
THERE ARE SEVERE PENALTIES TO BOTH BUYERS AND REAL ESTATE BROKERS WHO
MAKE FALSE DISCLOSURES ON HUD PROPERTIES! The penalty for declaring
owner-occupancy then selling for a profit in less than a year is $250,000 and jail time!
WHAT CONDITION ARE HUD HOMES IN?
Many people associate HUD homes with extremely trashed-out properties. That is not
necessarily so. It is true that many foreclosed homes have not been cared for, and the
evicted owners sometimes intentionally damage the properties out of resentment, and
sometimes even sell anything of value before they are removed from the property.
Often we see holes punched in walls, paint spilled on carpets, broken windows etc.
Some homes have even been stripped of appliances, doors, light fixtures, even
cabinets and plumbing fixtures. However this only describes perhaps 20% of HUD
homes. Another approximately 20-25% of HUD homes are in pristine condition, needing
nothing more than a carpet cleaning. Many have some or all appliances still in the
property. Many HUD homes have had some updating such as a new furnace, new roof,
new windows or new bathroom tile. While only about 25% of HUD homes are in need
of extensive repairs or complete updating, approximately half of all HUD homes are in a
completely liveable condition as they sit, from needing a fair amount of cosmetic
updating to needing virtually no attention at all.
WHAT ABOUT FINANCING?
Any type of financing may be obtained on HUD properties. Buyers are free to choose
any Lender they wish, and may have the property Inspected prior to purchase, just
like in any other Real Estate purchase. The only exception is that some HUD properties
may not be acceptable for FHA-insured financing. This is because FHA-insured loans
require that the property be in completely liveable condition, meaning everything must
be in good working order. So if plumbing fixtures are missing, carpet or flooring is torn
or missing, significant damage such as broken windows, missing doors, inadequate
paint, wall damage etc., then the property will not pass an FHA appraisal, so other
financing will be necessary such as conventional, subprime or cash.
FLOOD ZONES, LEAD PAINT AND OTHER SCARY STUFF
If you go onto the HUD website and view properties and click on the "View Property
Details" link to see the description of each house, you will almost always see a list of
repairs that the property needs. You will also see things like "FEMA Flood Zone X,"
"Lead-Based Paint," "Plumbing nonfunctional due to possible frozen lines," and other
things like that. Are these items of concern? Sometimes, but in many cases not.
Every house listed on the HUD site will say which FEMA flood zone it is in. That does
not necessarily mean it is in a Flood PLAIN, just which FEMA ZONE it is in. We have no
idea why anyone feels this must be listed on the site, especially in the Denver area.
Lead Paint is sometimes mentioned, not because there is lead paint, but because
Colorado law requires that a Lead-based Paint Disclosure form be provided in every
transaction if the property was built prior to 1978. So every home listed that was built
in 1977 or earlier will say "Lead Based Paint" in the details. However, be assured that
very few houses will actually have lead-based paint, since it was not even sold in
Denver since 1964. There is a difference between OIL-Based Paint (Linseed oil being
the vehicle, just as water is the vehicle in Latex paint) and lead-based paint. There is
no inherent danger in oil-based paint which is still sold today, it just poses more
inconveniences (higher price, longer drying time, flammable fumes, difficulty to use,
high odors etc).
IS THERE MONEY IN ESCROW ON HUD HOMES? NO!
On some HUD homes you may see notations like "$3500 repair escrow." Does that
mean there is money escrowed to receive for repairs upon purchase? NO! It is
misleading. All that means is that if an owner-occupant buyer uses only an FHA-203K
rehab type loan, FHA will allow that amount to be placed in escrow to complete those
specified repairs after closing. This is so a buyer can be approved to close on a loan
that normally would not pass an FHA appraisal, for example because of a non-working
furnace or other non-liveable issue. There is never any actual money in escrow, and no
buyer may ever receive any money at closing of a HUD home.
HUD TRENDS
There has been a highly significant increase in the number of HUD properties in the
Denver market over the past few years. Last year Denver led the nation in the
number of foreclosures and HUD properties. That is bad news for Sellers, facing
decreasing home values; but it is great news for Buyers, being able to obtain homes
for literally $50,000 to $75,000 below value in many cases.
Also a trend that has changed recently is that there are so many HUD properties on
the market, HUD has become more negotiable in their selling prices. The Sold-to-List
price has actually decreased over the past 2 years. Since 2005 over HALF of all HUD
homes actually are sold for significantly MORE than listing price, indicating that more
and more people are recognizing the value of HUD homes. Many HUD homes are being
bought for higher than asking price and are still below current market value in most
cases!
HOW CAN HUD HOMES BE BID ON?
Only HUD-registered Realtors may place bids on HUD properties. Good news: we are
HUD licensed! Bids are submitted online and the results will be posted the very next
day for properties in the Investor stage, and at the end of the 10-day period for
Owner-occupants. Once a bid is awarded, we have 48 hours to sign the contract,
disclosure forms & addendums, and obtain the $1000 earnest money check. Then HUD
allows 45 days to close on the property, which may be extended for $25 per day after
that.
HOW NEGOTIABLE ARE HUD PRICES?
HUD bids are not reviewed by human beings like a normal Seller or bank would
evaluate an offer. Everything is computerized, and they have specific formulas to
determine an acceptable bid.
If you are an Owner-Occupant we can find you a great bargain with significant instant
equity! If you are an Investor we can find you dozens of deals with fantastic Return on
Investment!
Click here to see a list of all HUD properties currently for sale. Once on the site,
click Colorado, then search available properties.
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