HUD Homes
What They Are and What They Are Not

You may have heard people talk about "HUD Homes" and the great deals you can get by buying one. Unfortunately, there is a great deal of misunderstanding and misinformation regarding these properties. If you are considering exploring this route to home ownership, you owe it to yourself to gain an understanding of where these properties come from and how they are marketed.

What A HUD Home Is
The Federal Housing Administration (FHA) operates under the oversite of The United States Department of Housing and Urban Development (HUD), and provides federal insurance on home mortgages. If a homeowner defaults on an FHA loan, the lender forecloses and files an insurance claim with HUD. HUD pays off the loan balance and receives title to the property. It is now a "HUD home". First Preston or Southeast Alliance (depending upon the state or territory where the property is located) then takes over the job of marketing the home to the general public.

What a HUD Home Is Not
Generally speaking, a HUD home is not a clean property you can pick up at below market value. HUD does not just give these properties away, and will not accept low offers until a property has been on the market for several months. Such properties are often in very bad condition.

More Bad News
Because of the incentives HUD offers (see "The Good News"), these homes are often the only avenue some cash-strapped buyers have to home ownership. As a result, bidding often pushes the home above market value. It is rare (although not unheard-of) to get a HUD home for significantly less than market value.

The Good News
HUD will pay up to 5% of a buyer's closing costs, and other incentive programs make it possible to buy the home with very little money down. There is even some talk of zero-down HUD programs in the works

How Do I Find One?
Log on to www.firstpreston.com. There you will find a comprehensive listing of all available HUD properties.

How Do I Buy One?
HUD homes are sold to the highest bidder, but the price must be acceptable to HUD. Bids must be placed through a HUD-approved broker. Again, visit www.firstpreston.com for a list of approved brokers.

The Bottom Line
HUD homes are a viable resource for those home buyers whose financial situation make it impossible to buy a home in the "regular" home market. In most cases, HUD homes are not a good source for bargain properties. The basic source for information on HUD homes is www.firspreston.com. Much of the information in this article is drawn from their site. For full information on how to view and purchase HUD properties, visitwww.firstpreston.com.