In today’s economy, foreclosures are the best real estate investment. However, there are many types of foreclosures that a real estate investor can invest in. HUD homes are considered by many to be the best foreclosures to invest in.
A HUD home is one that has been foreclosed on for default on an FHA-insured loan and has been turned over to the Department of Housing and Urban Development (HUD) for disposal.
HUD has no interest in keeping the real estate and is often willing to accept an offer much lower than the fair market value of the property.
There are numerous websites on the Internet that will sell you a list of HUD properties. They give the address, the mortgage amount owed, and many are updated daily. Even better than this, you can get a listing from a real estate agent licensed by HUD to sell the property. Any commission generated from a sale in this manner is paid by HUD.
After you get the list and choose a property you are considering, it is important that you view it. Take note of things that need to be fixed, as the house will be sold as-is. If you’re really interested in the house, you’ll probably want to have it inspected so there are no surprises later.
After viewing and inspection, you are ready to bid. Make an offer to HUD for the property. You should be aware that these properties generally sell for much less than the mortgage on the property.
If your offer isn’t accepted and you think it’s worth it, make a second, higher offer. If this is accepted, pay HUD in the way you have agreed, either in cash or through a mortgage which, hopefully, you have previously agreed to. If the mortgage is not prearranged, make the purchase contingent on obtaining a suitable mortgage.
After closing, if you’ve done your homework well, you should have a house that’s worth a lot more than you paid for it. You can make the repairs and rent it, live in it, or sell it for a profit.
If you resell the home, you may want to consider purchasing another HUD property and follow the same process. This is a great way to increase your net worth.