FHA (HUD) Foreclosures

9 Replies

Ok, I know I talked about this in another thread but basically this is a new question concerning HUD Foreclosures. I don't know how these gurus can Wholesale HUD Homes from the HUDHomeStore.com seeing you need a HUD Selling Agent who is also either a RE Agent or Broker to buy those homes, or am I wrong? From what I understand about Wholesaling and I can be wrong on that score too, is that you create a contract with a seller to purchase the home, then find a buyer to purchase the same house and then sell the contract at a higher price, that's about it in a nutshell, and I can not figure out how it can be done at the HUD Home Store.com but oh well, I did a check on my credit score and found out its higher then what I thought it was, my FICO Score is 580 instead of 545, which now qualifies me for a FHA Loan with some mortgage companies, my wife is now really excited to say the least, so I really need to understand how the HUD Home Store really works. When I was an REAgent I know that in order to sell houses in any State you have to be licensed for that particular State or States if the office has multiple offices in several States (ie: Century 21 for instance), even it is for a HUD Home.

Now on Foreclosures normally when you go to the Courthouse Steps to bid on a house, the normal bid starts at what is owed on the House, what it was foreclosed on, so the Bank or Mortgage company will get what is owed them, anything more then that is pure gravy for them (Profit). Is that the same as List Price at the HUD Home Store? And if I decide to bid less on the List Price, what is the recommended percentage, ok I am getting ahead of myself, I am buying A Home for myself and my family. And its just not in the State we live in, that is why the comment about other States, my wife saw some great looking and somewhat great looking homes that with my Debt to Income Ratio I should be able to afford even with my present income in other States, we even saw a few below $14k (not sure about the neighborhood though lol at that price). I know there are a few States that have down payment assistance programs as well making it a 100% Financing and I have no qualms in putting in a bit of sweat equity, and there were a few like that as well. But my main concern is understanding The HUD Home Store, how to bid properly, understand what is expected of me (besides paying for it) If I can get PreQualified here in Washington State to purchase a home lets say in Missiori for instance or Montana. If I can find an RE Agent here who is also a Listing Agent with HUD and Investor Friendly (I know some Brokers/Agents are not to Investor Friendly from what I have read here) as well as a nudge to the right Mortgage Company that does FHA Loans. Understanding what I am reading so I won't be to lost. Some of the Homes my wife looked at she really liked and wouldn't mind moving out of State, she even said so herself. All she wants is something that she can feel comfortable with, even if she has to do some dirty work to make it her own, a nice yard for our 12 year old son and a decent school system. Ok I made this to long and I am sorry, while I am waiting me and the missus are still shopping at the HUD Home Store (and yes I know its "The Good, The Bad and The Ugly, lol, we seen them. I have seen some houses that made my hair stand up, wow talk about scary lol). Thanks in advance.

@Richard Gaston  

On the courthouse steps, al least in my area only about 3% of the properties listed on the initial list are sold to 3rd parties.  Meaning 97% are either cancelled, postponed or sold to the banks foreclosing.  If the bidding goes higher than the amount owed to the banks, and all fees back interest, attorney fees, junior liens etc, then the excess goes back to the owner,  The only way the bank can profit is if the bank becomes the owner and then sells the property for more than is totally owed to them.  That rarely happens.  Statistically on every foreclosure the banks lose about 30% of the loan value.  It not a money making operation but is better than 100% loss.

On HUDs off what you feel comfortable offering.  Owner occupants get first crack at the properties for the first 15 days, after that investors can bid,  Some of their prices are high.  The price is based on an appraisal "in its current condition" and not the amount owed to the government.  Any shortfall is made up by the taxpayers.

There are instructions and a wealth of information right on the HUDhomestore website, and you should get connected with a local agent who is both registered with HUD to bid and experienced and familiar with the HUD process. And the HUD process is always being tweaked and the different asset managers have slightly different rules, but it is a relatively easy process and after the 15 day period, you can get the go-no go on any deal usually the next business day after the offer is received. then bid again if you like. Its very easy in the HUD process to test the lower price then increase your offer every day until its accepted or you reach your max offer. The properties are usually in fair to good condition and almost every one needs something often times major, but the worst it is the less competition and the better the deal.

@Richard Gaston  

There are other ways to wholesale a property besides a contract assignment. The most obvious way is to just buy the house and then sell it. I did that with a HUD one time. You could also do a double-close, use transactional funding, use a partner's money, etc, etc. And yes, you have to have an agent who is registered with HUD to place the bid (most Realtors are registered already). And they have to be licensed in the state where the property is located. For example, I place HUD offers in my home state of TN all the time, but I can not place an offer in Ohio or any other state.

You can't tie up a home with HUD unless you actually purchase it yourself with your own funds (cash,financing, etc). Also if you purchase it as an owner occupant, there are limitations to what you can do with the property (occupy for a year) and also how soon you can bid on any Hud properties ( 2 years).

And yes you need a HUD broker to bid for you.

Agree with all above.  One thing you need to factor is, qualifying for the new home, you're buying as an occupant in a different state.  That would necessarily require moving, and I'm guessing you don't have a new job in that area yet. You'll need a foreseeable source of o come, a job, to qualify for a loan.  Keep looking local, try to get preapproved for a 203k loan as it seems a lot of the houses you're seeing are not in financeable condition.

@David Krulac Thanks for the input, I just happen to notice what you just said at The HUD Store. I wasn't paying attention earlier, wife kept saying ohhh and ahhh on some of the houses lol...

@Everyone else, I am not trying to buy any property there as an Investor, to clarify what I was saying, I am trying to purchase as an Owner Occupant, sorry I wrote that late at night and was a bit tired even though it was my day off. I have been working and coming home to study as well as look at houses. There has been days (and I mean days not nights, I work a Graveyard shift so I sleep in the daytime) where I just don't go to sleep, I pass out from sheer exhausation.

@Wayne Brooks I have already factored in I may/will have to get a job in another State as well as do my business (Real Estate Investments, Fix and Flips and/or Wholesale. Long Term Goal: Buy and Hold as well as Fix and Flip and/or Wholesale) Right now I am trying to figure out if I get PreQualified for this State or do they factor in I may have to get a Job in another State if I move and basically tell me to wait until I move (which don't make sense, I need a place to move to lol) to the area and buy it AFTER I move there?

Yes, if you get preapproved now, it will be dependent upon your current employment.  If you have no job when you go to close, you get denied.  Talk to your mortgage broker.

@Wayne Brooks Thanks, my main question though is if I see a house in Montana for instance and its at the price range I want, can I living here in Washington get preapproved for a FHA Loan and a 203k if the house warrants it to purchase a house while I am here, or do I need to move to Montana? I know on other Mortgages, the Lender or Broker has to be licensed for that State, but seeing I am doing a FHA I was curious if its the same or not? And if it thats not the case I am looking at some homes in Missiori (ok I am not the best speller this early in the morning, just got off work) and I was wondering if there are any Agents/Brokers here who can help me with this, I may need to check with Mama to make sure if that is where she wants to move to though lol, she has been saying a lot of ohhhs and ahhhs. She found quite a few homes there that are really low in cost which makes it perfect for my Debt/Income Ratio right now. I don't know where she found this one home, it was a prefab and $8,000.00 lol and damage was minimal to say the least. But as you can see I have been looking lol, just waiting to find out if I have to be in the same State when I decide to purchase the home or just get Prequalified for a FHA Loan, purchase the house, make a couple of months payments to tied me over then move there, that was the idea anyways. Still need to wait on my wife to let me know where she wants to move to, what house etc. Ok I am taking way to long here, so thank you again Wayne :)

Talk to your mtg broker. RE agents can only work in that state they are licensed in. You will need a job in Missouri if you're going to buy a house in Missouri with an FHA loan since it will be owner occupied, you must move there to occupy. And yes, even lenders and the FHA realize that you won't be able to keep your current job when you move to Missouri, and it's unlikely you'll commute to work every day to your current job.

@Wayne Brooks oh darn, lol, j/k. Yeh that would be a very long commute lol. I thought as much but wanted to make sure, I knew if you did a convential loan you would have to live in the area, because most Lenders and/or Mortgage Brokers also has to be licensed for that State(s) I knew RE Agents/Brokers has to be License for the States they are helping with Sellers/Buyers. Just wasn't to sure if the same applied for FHA but I did guess as much. Thats ok, I have seen a few South of where I live that isn't to high in price either, just need some TLC which I don't mind, as I said I ain't afraid of putting in a little (or a lot) of sweat equity :) Even my wife has some ideas (as long as it isn't pink polka dots lol, and yes we have seen a couple houses with those {Shudders})

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