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How to Find, Understand and Buy HUD Homes



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hello I'm Jeremy drawl Beckwith mayor

first home mortgage and we're going to

go over a couple really cool things

today that uh that I think every

homebuyer and realtor should know and

that's how to navigate through some

different financing programs that are

out there some unique financing options

with HUD homes and so if you're looking

to purchase a HUD home let me first

explain what a HUD home is a HUD home is

a property that had an FHA mortgage on

it and was foreclosed on and FHA takes

these properties and then puts them back

on the market and they offer some

special financing options for them and a

lot of people don't know how to decipher

the different financing options

available on HUD homes so the first

thing to do if you're looking to buy a

HUD home is is get a list of HUD homes

out there in your area that are for sale

and where you can do that is at HUD home

store.com

that's HUD home store comm and when you

go onto that site here it'll come up and

you can select your state so we are in

Michigan right now so we're going to do

Michigan now this would work the same

for any state and what I'm going to do

just to kind of get a list of properties

is I'm going to put in a zip code here

and let's see 4 9 0 to 4 and we'll see

what comes up in that zip code and so

here in this 4 9 0 to 4 zip code we have

2 properties and we'll just click on the

first well let's do the second one it's

offered for sale here for sixty two

thousand and what you're going to see

when the property comes up is you'll see

you know the address and the bedrooms

and bathrooms and all that stuff and

that's usually what people are looking

at but there's some important

information in the right-hand column on

this website and well when I when I go

when somebody calls me about a HUD home

that they're interested in the first

thing I do is pull it up here at this on

this website at HUD home store calm and

I'll pull up the property and there's a

there's a couple things you can do with

with HUD homes so before we get into how

to exactly decipher this let's just talk

about the financing options that are

available now you can do any of the

traditional type of financing so that

would be

like a conventional loan with 5 10 15 20

plus percent down you could do a rural

development loan if the property is

eligible for Rd financing you could do a

rural development loan and we can put a

link if you want to check eligibility

for already financing a good website to

do that on is Rd area com so but that's

not what we're here to talk about so

we're here to talk really about the FHA

financing options and so HUD since HUD

foreclosed on these homes they HUD home

is an FHA loan and so through their own

financing internally they've offered up

some different types of options with

them and so what they did is before HUD

puts a property on the market they

actually have an appraisal done on the

property and you can look at the listing

here and you can see the date this the

house came on the market so this one

we're looking at here on Stratford was

put on the market 7/11 of 2013 and you

can look and see the value that the

appraisal came back at and so the FHA

appraisal that was done is going to

carry with the property on an FHA loan

so if somebody's getting a conventional

loan or an RD loan or a VA loan there's

going to be a new appraisal that's done

but if they're getting an FHA loan

they're going to be forced to use the

appraisal that's out there so this

particular appraisal came in at 62

thousand which is actually the list

price so before we go any further let's

talk about that because a lot of times

these houses come on the market and

there's so many bidders on them they'll

actually sell for more than what they're

listed for if the appraisal was at in

this example 62 thousand in the bid is

for sixty five thousand and that

borrower is getting an FHA loan they're

actually going to have to bring in the

difference because a new appraisal can't

be done and they're paying more than

what HUD feels of the house is worth

they would actually have to bring in

their three and a half percent down plus

an additional three thousand dollars so

that's very important if you're getting

an FHA loan and you're buying a HUD home

you want to check the appraised value

here on the website to make sure

you're not over bidding and if you are

that you have the cash to bring in the

difference the next thing in the column

here under the as is value which is the

appraised value

it says FHA financing and then it's

going to have a couple different

abbreviations here so the one that we're

looking at right now says ie

insured escrow and what that means is

that the appraisal that came back had

some required repairs and HUD is

allowing those repairs to be financed

into the loan as part of the transaction

and and this can be done with a very

simple standard it's called an FHA 203k

loan with a repair escrow and so it's

the realtor when the real just putting

in the bid they'll check the box FHA

203k with a repair escrow and what that

means is there's a list of repairs that

were word that's out there on this

appraisal and what what will happen is

if you look down just a little bit

further it says we're Paris Crowe and in

this one in two thousand two hundred

dollars and that repair at that two

thousand two hundred dollars will get

financed into the loan so the customer

will put their three and a half percent

down whatever they get it for and then

we as the lender will add an additional

twenty two hundred dollars into the loan

what happens is we close and then the

buyer is going to have a contractor come

in complete those repairs and then will

reenact ER out of that money we're

holding in escrow

now this can only be financed into the

loan on HUD property so somebody's

getting an FHA loan on another property

they can't do a 203 B and do it this way

this is very unique for HUD homes and

comes in real handy for getting a lot of

these required repairs taken care of now

let's see let's take a look and see if

this house has the published repairs on

it some of them do some of them don't

what you do is you click on addendums

and you go over to there's a box here

that says repair escrow items and if we

pull that attachment up let's see we get

a list of repairs and the repairs here

in this example again install permanent

hair handrails two hundred dollars loose

soffit on Front

backhouse hundred dollars gas furnace

not functional so they have $1,500 set

aside for a furnace and then there's

some defective paints and peeling paint

and then you always see that they hold

an extra 10% for contingency in case

there's some additional things that pop

up while the contractors out there doing

some work all right so let's go back

here to our HUD home store comm site so

we just looked at the repair escrow

items that were listed another place you

kind of get a clue of the condition of

the property is this PCR report and

we'll pull that up and you can see here

they give a list of some things that HUD

tested there's a you know they can see

you can see here gas furnace not

functional they tested some other things

in the house so that's always something

good for buyers to know about to look at

there all right and back to our site

again so that is probably one of the

most popular things that we do is this

repair escrow program on these HUD homes

the other option that a buyer has is a

203k loan and so you'll also see on here

it says 203k eligible yes and what that

means is it is eligible for a 203k

renovation loan that's a little

different than a repair escrow loan with

the repair escrow type of financing on

this what we're doing is we're financing

in only the appraiser required repairs

so it might have a purple toilet that

you don't like so sad too bad we can't

as long as that toilet flushes it's not

written up we can't put that into the

loan however with the 203k we can

finance anything in so if you want a new

kitchen new bathroom you want an

addition put on the house

that's where a 203k financing comes in

and you can watch some of our other

videos for more details on 203k loans

and now now I'm going to see if I can

find another house here and show you

another example of what is commonly seen

on these HUD homes so let's see okay so

I found a house that is for sale for

$8,000 so for all you motivated people

out there this one's $8,000 and I

guarantee this house needs some work and

so I pull it up

and the first thing I notice is that it

says FHA financing uninsured so the

other one said the other one we looked

at said insured and this one says

uninsured what that means is that the

repairs basically exceeded $4,000 and

HUD will not allow the repairs are too

extensive to allow for any kind of

repair escrow loan and so in this case

that cannot be done so that's where it

comes in you want to look at what type

of financing is being offered on the

house this one is still eligible for a

203k loan so since maybe there's $15,000

worth of renovations needed 203k loan

comes into play because we can do major

renovations like that all right now one

other thing i want to point out is when

you're looking at HUD homes another

thing to look at is how much bid time is

left and so when you look up at the top

here it shows bid submission time

remaining three days nine hours so what

that means is when HUD first puts these

houses on the market they're open up to

bids where they collect bids on them and

then in this case in four days basically

they're going to review the bids and

make a decision on the highest one if

they don't like any of them or there's

no bids then bidding goes to every 24

hours and it opens up to investors so

currently investors can't bid on this

$8,000 house my guess is if it doesn't

sell an investor will swoop in you know

once it opens up to them and pick it up

for 8 grand so that's kind of how that

works now we have some handouts and

printouts and stuff too and we'll put

some links in the video but here's kind

of a cheat sheet on what we talked about

that will will throw up there as a link

and if you're looking for more

information about just repairs in

general what's looked at with repairs

and different properties and things we

did a video about appraiser required

repair so we'll throw a link out there

for use on that as well and if you have

any questions as always you can get

ahold of us at Amir first comm i'm

jeremy drøbak thank you