6 Things you need to know about HUD Foreclosures in Louisville, Kentucky

Navigating the world of foreclosures is tricky, but steering around the rocks of HUD foreclosures is a totally different deal. The best advice is to insist on using a Realtor that has successfully closed a number of HUD foreclosures and knows their way around. Here’s the straight scoop to get you started:

The List Price is only a suggestion

Housing and Urban Development (HUD) has mastered the art of driving up the price. This is one reason why they don’t review owner-occupant offers until the 11th day on homes that need less than $5000 to make them FHA eligible. With HUD foreclosures, you are making a single bid for the property and you won’t get to know what any other interested bidder has offered. They accept the highest NET to the seller so if it’s the right one for you, bid like you want to own it.

Low-ballers Need not apply

The days of cheap HUD foreclosures are relatively over. If your offer is more than 10% off the list price they will most likely counter. They will continue to drag out the process a day at a time until someone else makes an offer. As soon as the other party offers more than you, they will start countering their offer instead of yours. The key is to offer enough to get it but not more than you have to.

A Property Condition Report is provided

The phrase “consider the source” is true here. With HUD foreclosures, unlike most other foreclosures, they have an independent company inspect the property. They will visually inspect the roof, water heater and structure; see if the water and sewer lines hold pressure; power on the furnace and AC; check stove/over if present; Use a generator to back-feed the electrical system. If there is a problem, they usually do not note anything other than it didn’t perform in an acceptable way (if there’s a leak, they don’t try to find it – they just notate that it doesn’t hold pressure). You should always get your own home inspection.

Timing is Everything

HUD foreclosures are time sensitive. Once you have an accepted offer, the signed offer, disclosures, disclaimers and notices must be sent overnight mail with the pre-approval letter and earnest money. If it isn’t received in time, they move on to the next highest acceptable bid. If signatures, dates or initials are missing, they can cancel your offer and move on. Your closing time is also strict and HUD charges a per diem fee (15 days at a time) for missing the deadline.

Utilities are a Bear

It is the buyer’s responsibility to coordinate getting the utilities on. A request form has to be submitted with a non-refundable fee for winterizing the property (depending on season) stating which 3 days you wish for the utilities to be on. The form has to be approved before the utilities can be activated. With HUD foreclosures the Buyer’s Agent has to be at the home when the gas or water is turned on.  Once they are on, the Buyer only has 3 days to do their inspections and then they will be shut off again. Under no circumstance can the utilities remain on until closing. Most Buyers have said that this is the single-most frustrating part of buying a HUD foreclosure.

AS-IS

HUD foreclosures are sold As-is and come with not warranties and the seller will do no repairs. However, the buyer can arrange for a 203k loan (known as a purchase & renovation loan). Buyers can borrow the rehab money and it is paid to contractors as the project is finished. These too are complex and we recommend using a loan officer that has done these in the past and knows what is entailed. HUD states that they will not agree to pay for repairs, although I have seen HUD agree to pay for something revealed in the inspection contrary to what their Property Condition Report stated.

This is in no way all-inclusive but if you want more information about buying HUD foreclosures you should contact a qualified, experienced Realtor like those at Louisville Market Realtors. We would love to walk you home!