Difference between HUD and Foreclosure

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There are many houses and property which have flooded the housing market and which are under foreclosure. For most of them, they are bought back by the organizations that financed them like banks and the department of Housing and Urban Development (HUD) in the United States. They are put back for sale in the real estate market after purchasing them back. As such, a buyer needs to conduct a thorough research so as to get a house whose price is reasonable.

When searching for house with a reasonable price, most individuals think that Foreclosures and HUDs are similar but they aren’t. It is the government, banks and lenders who own foreclosures whereas the HUD homes are normally owned and put in the market for purposes of sale by the department of Housing and Urban Development (HUD).

Process of Foreclosure

When borrowers cease to make mortgage payments on monthly basis, foreclosures occur. This kind of foreclosure normally depends on the mortgage loan of the borrower. When a borrower has a conventional loan which is a loan not insured by the federal government agency, their lender or bank handles the foreclosure and eventually takes the property ownership. If however the borrower’s mortgage has been insured by the Federal Housing Administration HUD also known as the FHA loan, HUD will take over the property in the event of a foreclosure.

Making an Offer

The manner in which HUD homes are purchased is different from purchasing a foreclosed home. In an arrangement of regular foreclosure, a buyer will make an offer to the seller after selecting the foreclosed property which he wishes to purchase and with a realtor’s help, the offer will be put forward or the buyer can place this offer by himself. Lenders and banks are the sellers.

However, one cannot make an offer on his own if he wants to buy a property under HUD. You have to go through real estate agents who will be your representatives in making the offer for the home.

Under the HUD arrangement, properties are placed on sale through a system of online bidding and there is a definite deadline for each HUD. It is only the bids made before the deadline that are considered.

There is normally a window period of 7-10 days where the home will be put on the market before an offer is reviewed. When you find a property in the market on the first day, you may place an offer but this will not be reviewed till 7 or 10 days have elapsed. This is because they like being fair by offering everybody an equal opportunity of placing their offer.

Prices

Some people believe that one can get a foreclosed home or HUD for just $1; this is a myth. Foreclosures and HUD homes come at a price closer to the market value of homes. As per RealtytTrac, an online foreclosure company, the mean price of a foreclosure property sold in 2013 was $ 167,095. Therefore, buyers are able to generate savings by purchasing HUD or foreclosed homes but such property cannot be stolen.

Multiple offers

In the case of foreclosures, some banks price their homes deliberately below the market value in order to entice many people to bid. This becomes difficult to buy a bank owned home since it only adds extra confusion to the whole process. This will however not happen under the case of HUD arrangement as they list the home for what they believe to be the rightful value.

As Is

Foreclosures and HUD properties are available in the ‘as is’ condition. As such, one is responsible for making repairs to the properties. This is a feature that can make a property that seems like a bargain to be quite expensive. This is why it is important to hire an inspector before purchasing such a home. You may cancel your purchase offer if the inspection brings to attention significant problem

 

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