The Foreclosure Report

Buying A HUD Home

The Denver Post reports from Colorado. "Buying a home continues to be an iffy proposition for many Coloradans. The state is on track to log more than 37,000 foreclosures this year, a 30 percent increase over last year, according to the Colorado Division of Housing. While so many people have been forced to surrender their piece of the American Dream, others have unearthed diamonds in the rough."

"HUD houses, once thought of as dilapidated properties reserved for low-income families, have been redefined as one of this decade's most accessible solutions to homeownership."

"A HUD home is a Department of Housing and Urban Development residential foreclosure property. The caveat with these homes that has changed the landscape for so many of today's first-time buyers is the caliber of HUD homes now available. 'The market is being flooded with houses that...people can now afford,' says Rachel Basye, spokeswoman for the Colorado Housing and Finance Authority."

"HUD homes, whether single family, townhouses or condominiums, are usually cheaper than comparable homes in the same neighborhood. The buying process is often less cumbersome, and many HUD homebuyers are able to cash in immediately on thousands of dollars of built-in equity."

"Many of the properties listed on the CHFA's website, Coloradohousingsearch.com, are such federally insured homes. But there is a catch: HUD homes are sold 'as-is.' That means the new owner must incur the expense of any necessary repairs, and those can be numerous and expensive."

"Some argue it's a fair trade, as HUD home prices are adjusted down
When Shannon DeLoach bought a HUD house two years ago its interior was comparable condition to this current HUD sale home nearby to account for expected improvements. HUD also goes through the trouble of pinpointing potential remodeling needs."

"Last week, for instance, HUD was offering a three-bedroom, 2 1/2-bathroom property in east Denver for $154,500. In ads for the property, HUD estimated that about $400 would be needed to replace a missing vent cover, a kitchen sink and address other plumbing issues. An initial inspection report also was included with the listing."

"Buyers should be realistic about how much repairs might cost, says Capital Brokers real estate agent Anthony Davis, who specializes in selling HUD properties. The $400 fix-up estimate for that east Denver property may have been low."

"Davis says any visual inspection of the home might reveal only inexpensive wear-and-tear issues. A subsequent investigation by a certified housing inspector could reveal a financial burden waiting to happen."

"Housing experts such as this advise that it is paramount to have these properties inspected before the closing so that buyers know exactly what they are getting into. A foreclosed house left vacant for months can develop unforeseen plumbing problems, for instance. It's also common to uncover damage to the roof, foundation, electrical wiring, water heater or furnace, expenses that could easily cost $20,000 to $30,000."

"Plus, previous owners often take out their anger and disappointment over the foreclosure on their property. One HUD home Davis sold had holes in the basement drywall where someone had repeatedly thrown a billiard ball against the wall."

"Jerry Chesser owns the Broomfield-based Win Home Inspection franchise and has investigated numerous HUD homes. 'There are some real gems out there,' Chesser says. 'Other times, conditions are such that buyers have to honestly ask themselves if they have enough cash...to bring the home up to livable standards.'"

"He has seen the previous owners of foreclosed homes drill holes in plumbing, kick in doors, throw bleach on carpeting and destroy garbage disposals. Another frequent problem: missing fixtures and appliances."

'Chesser says the best case scenario with a HUD house is severe cosmetic damage. The house may need new landscaping, caulking and waterproofing in the bathrooms, a few leaks plugged or a furnace replaced. The worst case scenario is a roof collapsing from water damage, mold creeping 4 feet up the walls, or that the property once housed a meth lab."

"HUD house investor Stephanie Williams suggests having enough money on hand to make mortgage payments should a refurbished foreclosure fail to sell quickly. Williams purchased a HUD home last November in Aurora for $151,000 and sold it for $172,000. But she had to carry the mortgage for three months before it sold."

"Loire Warren has fixed and flipped three HUD condos in Aurora since May 2006. Warren warns buyers to pull any criminal records associated with the house or the previous homeowner. One of her previous owners saddled Warren with more than $600 in unpaid homeowner's association fees."

"'It's very common that HUD will have liens against a property,' says Warren, who worked with HUD and the title company to pay off the liens."

posted by Ben Jones @ 4:55 AM