Look for Deals on HUD or Fannie Mae Homes
For some people, the term "foreclosure sale" summons up images of battered
tenements, while others may see big profits and unbelievable prices. But
these myths obscure the real story about foreclosure sales. Contrary to
popular opinion, foreclosed-on properties are not all alike. And they are
definitely worth exploring with the guidance of your real estate agent. The
Department of Housing and Urban Development (HUD) and Fannie Mae, the major
secondary mortgage company, are two major sources of foreclosure sales.
When someone with a HUD-insured mortgage can't meet the payments, the lender
forecloses on the home and HUD pays off the loan. HUD then takes ownership
of the home and tries to sell it at market value as quickly as possible.
What types of homes are sold and for how much? HUD homes vary in price and
location but most are affordable for people with low to moderate incomes. In
fact, HUD offers special buying incentives that can really sweeten the deal,
such as allowances for upgrading the property, moving expenses, and bonuses
for closing the sale early. In addition, if you qualify, you can ask HUD to
pay all or part of the financing and closing costs.
Remember that although these homes sometimes need repairs, HUD sells them
"as-is," without warranty. Make sure you get a professional, independent
home inspection prior to purchase. Don't expect HUD to repair any problems
as a condition of the sale, either. But that's not necessarily a bad thing.
HUD's asking price will probably be adjusted to reflect the cost of necessary
improvements or repairs.
Start by talking to an experienced real estate agent. Your real estate agent
must submit your bid for you. Normally, HUD Homes are sold in an "Offer
Period." At the end of the Offer Period, all offers are opened and,
basically, the highest bid is accepted. HUD usually pays the selling agent's
commissions, up to 6% maximum. Most HUD homes are initially offered on a
priority basis to owner occupant purchasers (people who are buying the home
as their primary residence). Following the priority period, unsold properties
are then available to all buyers, including investors. For more information
go to HUD's web site at http://www.hud.org
Fannie Mae offers a wide selection of homes, including single-family homes,
condominiums, and town houses, located in a variety of neighborhoods. Many of
these homes are relatively new while older homes are offered in some areas.
Some may require repairs. Again, it's smart to obtain a home inspection to
make sure you know the real condition of the property.
Like HUD foreclosure sales, you can find out about Fannie Mae-owned homes
through local real estate brokers. All Fannie Mae-owned homes are listed in
the local Multiple Listing System (MLS). First, you present your offer to the
listing broker who will present it to Fannie Mae for consideration. Through
the listing broker, Fannie Mae will do one of three things in response to
your offer: accept your offer; reject your offer; or make a "counter offer."
A counter indicates the start of negotiations that may or may not result in a
sale. If a sales price is agreed upon, you will sign a "purchase and sales
agreement" and begin the process of obtaining mortgage financing to purchase
You can search Fannie Mae-owned properties for sale on the Fannie Mae web
site at www.homepath.com