Investing in Phoenix HUD Homes
Department of Housing and Urban Development (HUD) REO properties are foreclosures that are available throughout Phoenix, AZ. If a Phoenix foreclosed home was purchased with a loan insured by the FHA, the Phoenix area lender involved can file an insurance claim for the balance due on the mortgage. FHA pays the lender's claim and transfers ownership of the property to HUD, which then sells the house as a Phoenix HUD home.
HUD begins by ordering an appraisal for the house, which helps them price it at the current market value for its size, location, features, and amenities. Phoenix HUD homes are sold as-is, so if the property needs repairs, HUD lowers the price to reflect the expense of projected repairs. Phoenix HUD homes are sold with a guarantee of title that allows the buyer and new lender, if there is one, to purchase title insurance policies.
Phoenix HUD foreclosures include many types of properties, such as single-family homes, duplexes and fourplexes, condominiums, and townhouses. They are sold through a sealed bidding process, and bids must be submitted on special HUD forms. Bids must be submitted through a real-estate agent.
HUD has a short initial offer period during which the first bids are accepted. Bids on the Phoenix HUD home are collected, but they remain sealed until the offer period ends, then all are opened at the same time. If HUD accepts one of these bids, it's the one that best covers HUD's investment in the property. If no bid is selected during this first round, all future bids are opened as they are received.
The winning bidder is usually notified within a day or two after bids are opened, and a closing date is scheduled to take place usually 45 days from the date of acceptance. A HUD home buyer can sometimes buy additional time by paying extra fees to HUD. If the buyer fails to close, HUD can keep the buyer's earnest money deposit, so don't bid on a HUD home unless you're sure you can get the funds to purchase it.
Investors are not allowed to bid during the first offer period because HUD prefers to sell its homes to owner-occupants. If an owner-occupant is not found during the first round of bids, investors are allowed to place a bid through their HUD approved Realtor (Green Leaf Realty agents).
HUD is concerned about fraud regarding owner occupancy. This is so true that they ask bidders who purchase a property during the initial offering to sign a statement that they have not purchased another HUD home in the previous 12 months and that they will occupy this home for at least twelve months. The real-estate agent must also sign a statement verifying that he has no knowledge that the buyer is an investor.
The price range that HUD homes typically fall in is attractive to first-time home buyers, but the Phoenix HUD homes are sold as-is, which can infer risk, especially for a first time home buyer. Inspection can be completed on the Phoenix HUD homes but investors, for example, will forfeit their earnest money deposit if they decide to cancel the purchase contract due to the condition of the home. Ideally a Phoenix HUD home buyer should have his/her inspections completed prior to making the bid but who really wants to spend hundreds of dollars when there is no guarantee that the bid on the Phoenix HUD home will be accepted?
That means fixer-upper foreclosures are often left for investors who are accustomed to dealing with repairs. But don't assume there won't be competition for the properties — there are plenty of investors out there who are looking for the same thing you are.
Give us a call at 602-993-7509 to talk to one of our Realtors with plenty of experience dealing with HUD foreclosures. Green Leaf Realty, LLC is an approved HUD real estate company that can help you place a bid on a Phoenix HUD home. If a property is hot, you might only have one shot at buying it, because incorrectly submitted bidding packets are discarded.