All Forum Posts by: Noreen Eddy

nice work! Thanks for sharing this info!

Hey, welcome to BP!

The short answer is yes.

The long answer is..

1. Renovations might take a while, depending on the condition of the property. You can't live there until you get a certificate of occupancy or at least have it inhabitable. 

2. "Primary residence" has different meanings.. in some cases, this means only 6 months out of the year.

3. We are owner occupants of a 203k and can't say anyone checked on us once.

4. Fraud is bad.  Orange fed jumpsuits and prison sound awful.

If I were you, if it's a reallllllly good deal, I'd find a way to live in it within the rules.  Our 203k has been a grand slam for us financially.  

@Greg H. I'm not so sure that HUD lists at full appraisal value. Ours was listed at $260k, we bid $287k, we appraised at $308k when purchasing. Our market was hot, all properties selling 10% higher than asking price at the time.

@Jonaye Barnum if I were you, I'd find hard money somewhere to cover your butt. Grandma, friends, family... whatever you can swing. I would not attempt to borrow any more of the money from a bank. I do not believe that HUD would allow that difference in appraisal value to be added to your mortgage. We bid well above asking on our HUD property and things turned out just fine. Our agent - very experienced - made no mention of this appraisal issue. Fortunately, we appraised high before closing.

I will keep my fingers crossed for you, and in the meantime, let us know how it goes!  

Final note - HUD inspectors aren't necessarily thorough. The guy who inspected our 203k (for final approval) literally didn't even look at the repairs on the 2nd floor, and took pictures of a "repaired wall" that wasn't even the correct wall..not even the same color room. That was the moment I decided HUD was a JOKE and was so pleased to get out of the 203k reno and refinance etc. So... yes, the property condition report is required to list it. How thorough the inspector was... eh.... you never know.

Our 2-family HUD house (built in 1912) couldn't even be tested before we bought it. We found a bunch of leaks under sinks, two main heat pipes, and had to replace 2 hot water heaters & 2 boilers before moving in. In the past 3.5 years we have gut-renovated 3 bathrooms and 2 kitchens, and almost replaced every inch of plumbing in the house (except for heating pipes_... probably have spent roughly $25-30k on plumbing overall. We knew that would be possible going in, and budgeted for it. We also don't regret it for a minute - financially, it STILL made sense, and now we're sitting pretty, house hacking our freshly renovated 2-fam, 13 miles from Manhattan.

Remember - HUD houses were foreclosed on. If the previous owner couldn't afford their mortgage, they likely couldn't afford necessary repairs. They also might have gotten pissed at the bank and drilled 3 equally spaced holes in a main steam pipe (ask me how I know...) ;-)

Run your numbers carefully, come up with a worst-case scenario, and ask yourself it's still worth it.  Very good advice written above this note also - see what else you can learn.  Consider bringing a plumber with you to view the house if you can swing it.  

Best of luck!  Keep us posted!

Good for you! I highly recommend you read Invest Four More's blog posts on HUD bidding. Google it.

Answers for you:

What I want to know is how firm on the list price is HUD?  Depends.  Sometimes you can bid less but it depends on other bidders, condition of property, etc.  Our hud home went over asking price - we studied other comparable houses in our area like any other house purchase.   For us, it was worth it to get our house, and still made $$ sense. 

Do I need to get FHA loan to complete the purchase?  I *think* it depends on the condition of the property.  If a regular mortgage won’t insure the house due to its poor condition (VERY common in hud homes), then yes, fha loan is the way to go.  Someone else please correct me on this if I’m wrong. 

Do I need to have an FHA per-loan approval, or can I find financing elsewhere later? Pretty sure you have to have loan approval when you bid on the property— I think the application asks if you will be paying cash or mortgage.

How much for a down payment, do I need to put in the offer? FHA loans are usually 3.5% down.

Be forewarned, HUD houses often have more work than meets the eye. Run your numbers and then add a contingency because you don't know what you don't know. Think about it - if you were the previous owner and couldn't pay your mortgage, would you really have spent money to keep the house in good condition...?

best of luck, hope this is helpful. 

Yes, HUD homes usually go to owner occupied buyers first. It's the government's way of building up a strong neighborhood. I agree with @Bruce Lynn, find a way to get your son listed as an owner with you.  Think of it as a speed bump, not a road block.  Best of luck!!

A couple of things to consider:

1. What kind of neighborhood has squatters and do you want to invest there?

2.  Was the dining turned bedroom done legally in this particular town?  Illegal bedrooms are probably not a good idea.  Also, what kind of renters will you attract without a dining room in the apartment, if you plan to go through with it?  

3.  203k loans include a NOTORIOUS amount of paperwork, and are often used on properties that would otherwise not be insurable.  6 months is not a long time, especially for the scope of damage you're describing - though yes, I believe extensions are possible as said above.  A lender will be the judge of what makes the property "safe" to their standards.  Keep in mind that a fire can cause structural damage (=$$ and time!).  

I agree with above - definitely get a contractor(s) to come with you when you get permission to assess the property from the inside.  I recommend using both a contractor and a lender familiar with the 203k process.  I personally would not buy this sight unseen.  

Best of luck!

Do not under any circumstances trust HUD's inspection. They are the seller. In this case they are trying to get the most money for their distressed property and get it quick. $700 is nothing compared to the costs (Five figures) of repairing entire systems - and with HUD houses you can assume that something is drastically wrong. Get your own inspection done.

Invest four more gas excellent advice on HUD bidding - check out his stuff. The computer program either accepts or denies your bid based on the minimum set by HUD. I agree with @Michael Ablan, start low and work your way up to as high as you feel comfortable on your numbers.