Buying a “HUD Home,” or a home owned by the Department of Housing and Urban Development, can be a great investment, but many people know little to nothing about the process. For starters, a HUD home is a home that has fallen into foreclosure that was purchased with an FHA loan. An FHA loan is an affordable option for many Americans, since it typically requires a smaller down payment than a conventional loan. For this reason, the Federal Housing Administration insures the loan to protect FHA-approved lenders, since the assumption is that a lower income family is more at-risk for foreclosure.

Buying a HUD home is a bit different than buying a regular bank-owned property, since they are exclusively sold online in an auction process known as an “offer period.” As a buyer, you will have your agent make your offer during this offer period. Once the “offer period” is closed, all offers are opened and are considered to have been received simultaneously. The highest bid is accepted and your agent will be contacted with the good news. If no offers are made on the home, HUD will lower the price and start the process over.

Unlike a regular sale or even a typical bank-owned sale, you will need to hire a buyer’s agent for any HUD home purchase. Not only will you need a buyer’s agent, but you will need to find an agent registered with HUD. The Department of Housing and Urban Development’s website will show you current HUD homes for sale as well as the agents that represented the most winning bids. Interview the top two or three Berkeley Real Estate Agents before deciding who should represent you.

Make sure to inspect the property fully, since all HUD homes have gone through the foreclosure process. Foreclosures have likely sat on the vacant on the market for months or even years, plus it’s not uncommon for homeowners to leave the home in bad shape.

After making your offer, be ready to close on your home quickly. As of now you may have anywhere from 45 to 60 days to close, but HUD is moving towards a 30-day contract, so it’s important to be pre-qualified and ready to go. You may be able to qualify for your own FHA loan, so be sure to talk to your real estate agent and lender to learn about your own affordable housing options.

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