If you are looking to purchase a home in Virginia, you may have noticed that homes designated as HUD homes are usually some of the most affordable. So just what is a HUD home? Who qualifies for HUD housing? And how can you buy a HUD home?
HUD homes are residential properties acquired by Housing and Urban Development (HUD) because of a foreclosure action on a Federal Housing Agency (FHA) insured mortgage. HUD becomes the owner of these properties due to the foreclosure claim, and, since the agency is not in the business of owning property, then sells them to recover their loss.
Where to Find HUD Homes
There are many listings available for HUD homes. Virginia usually has thousands of HUD listings available. Perhaps the most comprehensive resource is the Housing and Urban Development website’s own listing of HUD homes available. In addition to having a great listing of available properties, this webpage also includes helpful information about each listing, including directions, location on a map, and information about demographics and schools in the area.
When you find a home on a HUD listing that interests you, you will need a HUD-approved real estate broker to start the process. Luckily, the List With Elizabeth team can help with this! Because while you can access the HUD homes listing site, only an authorized agent can show you the homes and make an offer on them for you.
The HUD Auction Process
With an authorized real estate agent, almost all homebuyers are eligible to purchase HUD homes in the state of Virginia. HUD listings are usually available to homebuyers and real estate investors through sales at online or local auctions, and your HUD-approved agent can make your bid for you.
At these sales, the homes are exceptionally well priced, so winners could end up with really strong deals. In fact, HUD homes are usually offered at 30 – 50% below market value.
When you are considering the amount of your offer, keep in mind that HUD is working to divest themselves of the property, but is still interested in recouping its losses, so the agency is most likely to accept a bid that covers the majority of its costs. Obviously, HUD will accept a lower bid if necessary, but the agency can hold a property for longer than your typical seller; Some homes are held for up to six months.
Making a Qualifying Bid
With guidance from your real estate agent, you can strategize and make a qualifying bid. Like other home purchases, you can buy a HUD home with cash, or with mortgage financing. Mortgage-backed bidders are more limited on how much their lenders may allow them to bid on a property, however, reflecting the property’s appraised value and the potential buyer’s own financial circumstances. Cash bidders don’t have the same restrictions, so they may have a better chance of winning their HUD home bid.
As your HUD-approved real estate agent will tell you, if you are planning to live in the home, it is advantageous to bid early. The best deals are usually early in the auction, during the auction’s “owner-occupant” period. An owner-occupant owns the property and resides at that property, which HUD finds most acceptable, so bids accepted during this 15 day period are usually the most favorable to buyers. If no buyer is selected during this time, investors will then be granted the opportunity to bid.
Also keep in mind that if HUD decides not to accept any offers from home buyers, it has the option to sell the house to another government agency — for as low as $1! – to provide low-income housing or to fulfill some other aspect of HUD’s mission to benefit the community.
Eventually, all successful bids are located on the Housing and Urban Development site, so you’ll be able to see how much HUD homes in Virginia are selling for during the auction process, and this may help you and your HUD-approved real estate agent to craft your future bid and win your dream home.