Published 9 December 2019
Prior to the Great Depression of the 1930s, obtaining a mortgage was a challenging task. Down payments were typically 50 percent of the purchase price, loan terms seldom exceeded 10 years, and balloon payments were the order of the day. It wasn’t until the passage of the Federal Home Loan Bank Act of 1932 that the mortgages we take for granted today began to emerge as part of President Roosevelt’s New Deal. Two years later, the Federal Housing Administration was established.
FHA’s mission is to insure lenders who make FHA loans, against losses they may suffer in the event a borrower defaults.
“FHA insurance gave lenders added security and expanded the pool of potential homebuyers for whom lenders were willing to underwrite loans,” according to the Federal Housing Finance Agency’s History of Government Sponsored Enterprises. In reality, FHA has become the world’s largest mortgage insurance company.
The agency, which became a part of the U.S. Department of Housing and Urban Development’s Office of Housing in 1965, insured 274,151 — or 15.6 percent — of the 1,753,347 one-to-four-unit home loans made during the second quarter of this year, according to HUD.
HUD acquires a property following an unsuccessful foreclosure auction at which the high bid, if any, falls short of the amount owed against the property. In other words, ownership of the property reverts to HUD if no one was willing to pay at least what was owed against the property. Once the paperwork is in order, HUD lists the properties for sale on their website, https://www.hudhomestore.com.
Potential buyers and agents can shop for HUD homes located anywhere in the U.S. or its possessions by simply clicking on the desired state or territory. New Mexico properties routinely show up on the website, with many listed for sale in and around Las Cruces
HUD is assisted by various real estate brokerage companies that contract to represent the agency during the sale. The buyer’s side of the transaction is typically handled by a local Realtor chosen by the buyer. Most agents are HUD-approved, but it doesn’t hurt to ask — just to make sure. The agent submits the buyer’s offer via HUD’s online portal.
The arm of HUD that markets the properties doesn’t offer financing for the homes they sell, so prospective buyers are obligated to pay cash or arrange their own new FHA, VA or conventional financing just as they would if they were to purchase a home from a private party. First-time homebuyer financing is also accepted. In some cases, FHA may allow a purchaser to assume the previous owner’s loan.
HUD competes for buyers alongside normal homeowners and investors who are also trying to sell their properties, so they typically attach very competitive prices to their offerings.
Take, for example, the 3-bedroom, 2 bath HUD listing located at 447 Gabaldon Road in Anthony. The listing price of $134,500 posted on HUD’s website on December 3 was $17,292, or 11.4 percent, below the Dona Ana County Assessor’s appraised value of $151,972.
Another example is the HUD listing located at 5836 Sandpiper Drive in Santa Teresa. The 1,764 square foot 4-bedroom, 2-bath residence is listed at $102,168, with an assessed value of $146,097.
Properties are typically sold “as is”, so buyers should conduct thorough inspections before committing themselves to the purchase. For properties that require a good bit of rehabilitation, FHA offers its 203k loan that covers both the purchase price and the subsequent repair costs. Successful buyers close on the property just as they would any other home purchase.
HUD is not the only government agency that sells homes on which they’ve foreclosed or seized. Agencies such as the Department of Veterans Affairs, the Federal Deposit Insurance Corporation, the Internal Revenue and U.S. Marshal’s Services also list homes for sale on their websites. A complete list of links to government agency listings can be found at https://www.hud.gov/topics/homes_for_sale.
With a bit of luck and a sharp agent in your corner, you could very well be the next lucky buyer to snag the bargain of a lifetime.
See you at closing.
Gary Sandler is a full-time Realtor and president of Gary Sandler Inc., Realtors in Las Cruces. He loves to answer questions and can be reached at 575-642-2292 or Gary@GarySandler.com.