Thread: Buying HUD Homes as Investments

Just wondering if anyone here bids on or buys HUD homes?

I really had no idea what they were until today (I didn't realize they were just foreclosed-upon FHA loans), and am now wondering if they may be a good source for finding rental properties?

Some thoughts:

- The HUD appraisals (that end up being the original listing price) that I've seen appear to be somewhat conservative, often less than what I'd consider market value; it appears that the price is discounted based on the level of disrepair the house is in, but that the rehab would not be as expensive as the price differential for the repairs (does that make any sense?);

- HUD listings often are accompanied by Property Inspection Reports, so it's easy to weed through lots of listings without having to visit every property (for example, it's nice to know upfront that there are major cracks in the foundation without having to drive 20 minutes to see the property);

- In this market, I imagine the 10-day offer period often completes without a winning bid (during the first 10 days of a HUD listing, only owner-occupants can bid, after which it opens up to investors). So, there are probably a high percentage of listings that are available to investors;

- HUD seems to have a very well defined process for accepting/considering bids, so while you can't get creative in your offers/deals, at least you know what to expect and can optimize your offers to the process.

Anyone familiar with making HUD offers or buying HUD properties? Any other thoughts, ideas or suggestions?

Thanks!

Btw, for anyone interested, here's more info: http://www.hud.gov/offices/hsg/sfh/reo/reobuyfaq.cfm

Interesting idea. I haven't heard about this before. I'm anxious to hear the responses.

Originally Posted by MsMoney

JScott...are you a realtor? I am, and I know when I used to buy HUD properties (approx 4+ years ago) you had to be a realtor in order to submit a bid...and your broker had to be signed up with HUD in order to do it.

Thanks for the info, speed++

Nope, I'm not a realtor, but from what I've read, there are plenty of realtors that are "HUD approved" and any of them can submit bids on your behalf...

Please correct me if I'm wrong on that!

You can find some great deals on H.U.D. homes as was mentioned previously. In my state the bidding is open to owner-occupants only at first and if the desired price is not met then they will open bidding to investors as well. You must be on an approved Realtor list to bid on the properties which can be a pain. Overall I have had great experiences dealing with H.U.D. and would highly recommend it as a research tool for deals.

First, I'm with hakrjak here in that HUD foreclosures are probably the first properties investors look at each Friday when they come available (are first listed). I've bid on numerous HUD's, but have only won two of them. One was the first investment property I ever got and I still own (VERY good investment). The other was my second investment property, and I learned a LOT about what NOT to do. I ended up losing about $1,000 on it because I didn't do my due diligence enough (had I, I would never have made the offer I did).

HUDs are not for the squimish as they are VERY picky about their paperwork. They don't care if they have to relist the property due to you not "dotting an i" or "crossing a t" properly. So, make sure you get an agent that is seasoned with them. For example, they make you submit a copy of a cashier's check with your contract package. Mine was two months old, so they gave me 24hrs to get a new one or void the contract. In another incident, my prequal letter was missing the EXACT verbage they required, and I had 48hrs to submit a new one or void the contract. Again, picky.

There are deals to be had, but like hakrjak, my area is now saturated with investors watching late night infomercials who bid higher on a trashed HUD home than if they were brand new. Almost impossible to find a good deal now. Of course, not every market is the same. Mine is the new "hotbed" of RE investing, Austin, TX, so your's may be different.

Folks,

Great advice...much appreciated!

I'm trying to figure out if the HUD market might be better in my area with the RE downturn or worse? Better is a possibility because there are so many investors on the sidelines these days (or just plain out of the game)...and Worse is a possibility because HUD is probably offering better deals (as the list price is based on appraisal), so the investors that have stuck around are probably swarming.

Maybe I'll check a few out and make a few bids...and will let you know!

Speed++ to everyone who replied...