• Nov 20, 2016 Looking for a bargain? Try HUD
    Gary Sandler
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    Published 20 November 2016

    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 (FHA) 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 (https://www.fhfaoig.gov/LearnMore/History). 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 (HUD’s) Office of Housing in 1965, insured 17.8 percent of the 1.6 million one-to-four-unit home loans made in Q4 of 2015, according to RealtyTrac’s U.S. Residential Property Loan Origination Report issued earlier this year (www.realtytrac.com). On the downside of the equation, the Board of Governors of the Federal Reserve System recently reported that 4.55 percent of all mortgage loans are currently delinquent.

    HUD acquires a property following an unsuccessful foreclosure auction at which the high bid falls short of the amount owed against the property. In other words, no sale. Once the legal 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. Sixty of the recently repossessed homes are located in New Mexico, with eight currently 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. Some properties are offered first to buyers who intend to occupy the property as their primary residence before being offered to all buyers, including investors.

    FHA doesn’t offer financing on repossessed homes, per se, so prospective buyers are obligated to pay cash or arrange their own new FHA, VA or conventional financing just as they would for any other type of home purchase. In some cases, FHA may allow a purchaser to assume the previous owner’s loan. Properties are sold “as is”, so buyers should conduct through 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. Winning bidders close on the property just as they would any other home purchase.

    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. 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 can be reached at (575) 642-2292 or Gary@GarySandler.com.

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      Gary Sandler