Part Three of a three part series

By Vito Simone

HOW DO I ACTUALLY BUY A HUD HOME?Now that you know how a home becomes a HUD Home and what an FHA 203k rehab loan can do for you, we need to understand how to actually buy the property. A review of previous articles will give you good background, but the process is straightforward.

Unless you are a Teacher or a Police Officer, you need to find a good real estate agent that is knowledgeable in Hud and FHA procedures and guidelines. I suggest that even Teachers and Police Officers should seek out the assistance of a knowledgeable agent. You can try www.USHUD.com for information and free referrals (USHUD.com gets no referral fees). Teachers and Police Officers are eligible for special programs, the Officer/Teacher Next Door Programs, which will be covered in future articles. Everyone else needs a real estate agent to submit a bid to Hud on his or her behalf.

Looking over the Hud List is something you can do on your own. There are basically two ways:

1. www.hud.gov (find your state and county) and read through the list of available homes;
2. www.USHUD.com will actually let you sort the Hud List by either: Zip Code, Address, FHA Case number, or Price. You can even sort by any 2 criteria. For example, you may be looking for something in a particular zip code or zip codes for under $99,000. The ONLY place you can do this type of search is on USHUD.com. This is particularly helpful if there are many Hud Homes in your area.

If your agent cannot find a Hud Home for you, there are tools you can use to find the home yourself. You will still need a real estate agent that is registered with Hud to bid on these properties. It is helpful to know this in advance because there are bidding deadlines to be concerned about. You do not want to find a home only to find out that the bid is due at midnight tonight and your agent is not registered with Hud!

All bids are due at midnight on the bid deadline published on the Hud List. Since the bids are submitted through the Internet, your agent can submit up until midnight. Be sure to ask your agent to PRINT the Bid Confirmation that Hud presents on the computer screen. This is the only way to "find" your bid if it gets "lost".

Most markets list the NEW LISTINGS on Fridays and have a bid deadline the following Tuesday. Bids for these properties are available only to Owner-Occupant bidders who bid at least full price. Hud tries to give new homeowners a short period of time to bid against other new homeowners (as opposed to experienced investors). If the property is not sold to an Owner-Occupant, the property is made available for bids on a DAILY basis.

The daily bid properties are sometimes allocated to Owner-Occupants again for a short period of time before they move to the final category, daily bids by All Purchasers. Anyone can bid on these properties and you can bid any price; it does not mean that Hud will take the highest offer. After all, this is not an auction; it is a sealed bid process. Each market does have slightly different timeframes for these categories, but now that you know about them, you will be able to determine the rules in your area.

Let’s review:

1. Owner-Occupants only – Full Price within published bid deadline;
2. Daily, Owner-Occupants – LESS than Full Price, midnight deadline;
3. Daily, All Purchasers – Any buyer, any price acceptable to Hud.

There has always been talk of Hud’s "magic number" in terms of how low they will go. Don’t let anyone tell you they know this bottom line number because the Hud Management and Marketing Contractors (M&M’s) who sell the houses for Hud don’t know and if they did, they certainly are not going to broadcast the information. I have seen Hud reject one offer on one day and take a slightly higher OR lower offer on another day.

The real point is to do your homework. Before you look for a home you will determine how much house you can afford to buy. This is absolutely critical to do BEFORE you start looking. It’s just too easy to fall in love with a house you cannot afford to buy. Find the house you think you like and (with the help of your real estate agent) determine what the houses sell for in that immediate area. You will find that Hud Homes can be great values, sometimes even great bargains, but they can also sell for market value if they are in good shape and in a desirable area.

Once you determine that the home will work for your family and is a good value for you, then you determine how much you want to pay for the property. Anytime you bid real low you risk losing the bid to someone else who really wants the property. My suggestion is to pay what you can afford to pay for the house you will call home. If you only want it if it is a "super bargain", then take your chances and bid whatever you want. However, a word of caution, good Hud Homes in desirable areas come and go very fast. Be prepared to be decisive, but do not rush into anything.

If you do your homework up front you will be better prepared to take advantage of that "great deal" that comes your way and requires you to move quickly in order to get it.

Steps You Should Take:

1. Get yourself pre-qualified before looking ;
2. Look for houses in your price range and in your area of interest;
3. Check the Hud List yourself on a regular basis;
4. Find a knowledgeable real estate agent to work with;
5. Don’t be afraid to bid on what you like;
6. Make sure you get a Home Inspection if you are the successful bidder;

There is no substitute for knowledge and common sense regardless of what you are trying to do, but they are necessary ingredients for you to make the largest single purchase you will ever make. I consider it a privilege to help families make this decision and welcome your comments, questions, and success stories.

(c) 2000 Vito Simone (used by permission). Vito Simone is a licensed real estate broker in Baltimore, Maryland and has been licensed since 1988. He is the broker of record for Tenant Buyer Homes, has nearly 1,000 completed transactions and extensive experience selling HUD, VA and bank owned foreclosures. You can check out his web site at www.tenantbuyerhomes.com