Buying HUD Repossessed Homes
When a property with an FHA loan goes into foreclosure, HUD pays the lender and takes over the property. It then gets marketed through a bidding process administered by a regional contractor, which in Texas is Southwest Alliance.
HUD owned properties provide an excellent opportunity for bargain hunters and investors who want to make some money on fixer-uppers. HUD homes are sold "AS-IS", and therefore sell at a discount. Some may need a lot of work, while others are in excellent condition. You have the opportunity to see the house before you bid, and will have a chance to get an inspection.
A broker needs to be registered with HUD and have a NAID number to be able to place bids. There is more paperwork involved than a typical transaction, and mistakes can cause your bid to be canceled. Knowing what to bid requires an understanding of HUD's acceptance parameters and the calculation of the net to HUD. To get the best deal, you need to know what the minimum acceptable bid will be, as well as having a feel for what other bidders are probably doing. All agents at Creekview Realty are very well qualified in every aspect of bidding on and closing HUD homes and foreclosures.
As of 2005, Southwest Alliance started handling Bank of America foreclosures, so information on these homes is available as well on the same website.
Once you are on the Southwest Alliance home page, click on "View Property Listings". Select "Texas", and click "Search". You now have various search parameters that are self-explanatory, and there are directions that can help you along. Note that if you click on "Display Cities From Selected State", only those cities will display that have properties available.
One inconvenience is that square footage of the houses isn't displayed. To get those, you can look up the property on the appropriate Tax Appraisal District website. You can find the links on Tax Appraisal Districts page.
The homes will often be listed in MLS as well, so you may be able to obtain more information from Realtor.com or the public website of your local MLS.
HUD requires your agent to have a signed offer with about 10 other documents, and a cashier's check of either $500 or $1000 (depending on the offer amount) before a bid is placed. Documents require original signatures in blue ink, so you can't simply fax offers like you can with MLS listed homes. Some investors we work with have given us pre-signed documents with the property information blank, and a check. With their authorization, we can complete the remaining information if their bid gets accepted, or use it for another bid.
For more detailed information, see the HUD Guidebook for Real Estate Professionals. It's a 17 page booklet intended to educate brokers about all that's involved in the process, including bidding, paperwork needed, and closing the transaction. If you want a thorough, detailed understanding of how it all works, read this guide.
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