Owned by the U.S. Department of Housing and Urban Development, a HUD home is a kind of residential foreclosure. When a home financed by a Federal Housing Administration (FHA) loan goes into foreclosure, the original lender gets reimbursed by HUD for the outstanding loan balance. HUD then takes over ownership of the property and sells it to compensate for the cost it paid to the lender.
What’s different about buying a HUD home versus another home?
When a regular home is listed for sale, the seller works with their real estate agent to come up with a price based on comparable houses in the area.
However, when a HUD home is put on the market, it goes through an appraisal process to determine its fair market value. The list price also takes into account any necessary repairs that are needed in the home.
With a normal listing, you’d tour the house and ask your real estate agent to make an offer. While you still tour HUD homes with your agent, the offer process is completely different. Rather than making a traditional offer, you instead bid on a HUD home. Only certain agents are able to make HUD home bids, so you’ll need to seek out a pro who’s experienced in these types of sales.
Each HUD home has a designated bid period. Once yours is submitted, it will be compared to any other bids that have been received. If yours is the highest offer, you’ll get an acknowledgment from HUD.
What is the buying process like for a HUD home?
You often only get one shot at placing an offer on a HUD home, so it’s important to develop an informed strategy beforehand. While you may think that a HUD home warrants an automatic lowball offer, this isn’t always the case, especially if you live in a competitive real estate market like Denver.
Ready to start checking out some Denver’s HUD home options? Contact Metrowest! We specialize in these types of sales and would love to help you start the process.