Monthly Archives: October 2016

Buying HUD Homes

The U.S. Department of Housing and Urban Development (HUD) was established in 1968. It was originally developed to manage federal housing and community development programs.

HUD incorporated numerous housing agencies and assumed administrative responsibility for them. One of these agencies was the Federal Housing Administration (FHA). Since 1971 the agency has been commonly known as HUD/FHA.

How Does HUD Get the Property?

The old FHA programs and the newer HUD programs act as an insurance agency for banks, savings and loans and mortgage bankers who make real estate loans to buyers and investors. HUD/FHA does not make the loan, they only insure the lender against loss in the event of default.

You apply for a real estate loan through an approved HUD lender, the lender determines whether your application is accepted, and if so, gives the money to you. Once the money has been given, the lender will receive an insurance policy from HUD that protects its financial interest.

HUD homes are sold to the public when HUD/FHA mortgages are foreclosed. HUD pays the original lender the amount of the loan due and other expenses. HUD then resells the property.

Once the loan is made by the bank, savings and loan or other authorized lender, that lender does have the right to foreclose on the property if the borrower fails to make their monthly payments on time. When the foreclosure process has been completed, the lender submits its HUD insurance policy back to them with foreclosure costs, accumulated interest and legal fees for reimbursement.

HUD will reimburse the lender. With the lender paid off and no longer in the picture, HUD, who now owns the property, can dispose of it in any manner deemed reasonable.

How Does HUD Sell Property?

When HUD gets a property back, it turns it over to its Property Disposition Department which first secures the property from vandalism or damage. Next, this department determines if the property will be sold directly or through an outside broker.

If a broker is used, he must complete the necessary repairs required by HUD, secure the property, advertise the property, accept sealed bids, control the escrow account and make sure the escrow closes.

HUD will pay a 6 percent sales commission to agents involved in the sale, whether sold through a broker or sold by HUD directly.

HUD will allow real estate agents to acquire HUD properties. A real estate agent bidding on a HUD property could effectively reduce his bid price by the amount of commission he may earn on the sale. Clearly, this gives the agent an unfair advantage.

In addition, an authorized HUD broker will receive lists of HUD properties before the general public does. A broker could prevent the public from having access to properties.

To buy a HUD home, you must contact a licensed and approved HUD broker or other agent authorized to sell HUD-owned homes. All offers are submitted through him.

HUD properties are sold “as is.” All properties are sold on a cash basis. While paying in cash is not required, having your financing arranged without HUD is. HUD will not be required to arrange or carry financing themselves. You will need the services of a conventional mortgage lender.

Condition of HUD Homes

HUD homes can be of low to moderate value. Traditionally, however, HUD homes have been in better shape than the average VA property.

As discussed earlier, if real estate agents can bid on and buy HUD homes at an unfair advantage to the home buyer and investor, then it stands to reason that many of the nicer properties are bought by these agents. The result may be lesser quality homes left for the general public.

Locating HUD Homes

You can find HUD properties by calling a local real estate agent or authorized HUD broker, looking in the newspaper for HUD property sales or by calling HUD directly. Check you local phone book for HUD registered real estate agents.

If you contact HUD directly, they may not send you a list of properties, but they can send you a list of HUD authorized brokers in your area. HUD brokers receive new listings of HUD homes every week. If sold directly, HUD will generally place ads in newspapers, rather than place individuals on mailing lists for their single-family homes.

Buying HUD Homes

Armed with your list of available properties, narrow your selection by price, neighborhood, or size. Try to drive by the property if possible.

HUD restricts the sale of some properties to “owner occupant” only. Generally advertised under the heading, “New Listings,” HUD wants the buyers of these properties to actually reside at that property for at least one year.

The advertisement will indicate the case number, address, number of bedrooms and bathrooms, price, an unrepaired price and repair escrow amount if available. Due dates for bids are listed. There will also be a statement indicating whether or not these properties are eligible for FHA-insured financing.

If you are still interested, contact an authorized HUD agent. The bid package will state whether the home can be insured through HUD from a private lender. If the property can not be insured by HUD, ask yourself why and do you really want the property?

Inspect the property. Always do a thorough inspection inside and out of a property you intend to purchase. If necessary, hire a professional inspection service. Compare the asking price to the “sold” prices of comparable properties in the area. There is a good chance the asking price will be around fair market value.

HUD claims to use current appraisals to establish each home’s value according to age, condition, size, location, and lot size.

If you still want the property, you must submit a bid package containing a complete set of contracts to a HUD field office with your deposit of 5 percent. The deposit must be in cash, cashiers check, money order or appropriate letter of credit.

The bid package contains instructions, a sales contract, a “Forfeiture of Earnest Money Deposits” document and an addendum regarding lead-based paints.

The “Forfeiture of Earnest Money Deposit” document clearly states that if an individual buyer submits a contract to purchase a HUD home and does not perform, the 5 percent deposit will be retained by HUD on a non-refundable basis.

The buyer has 30 days to close escrow once the bid has been accepted. Extensions of this deadline can be authorized by HUD by prior written approval. Extensions are normally granted when a private lender has agreed to finance the property but needs more time to process the loan application.

The “Lead-Based Paint Addendum” disclaims any and all responsibility from the government if illness is caused by owning a HUD-owned property, whether or not it contains lead-based paint. When signed, this document completely declares HUD immune to any future claims.

HUD defines a one-to-four unit property as either a single-family, duplex, triplex or fourplex. These are properties that can be sold through HUD brokers.

HUD defines an apartment complex as a property which has five or more units contained within it. They can be walk-ups, townhouses rented as apartments and have either no garages or detached garages.

Unlike the procedure for single-family to fourplex properties, HUD likes to sell the multi-family properties directly through their Property Disposition Department in Washington, D.C.

You may bid more or less than the asking amount for any HUD home. If you are not the successful bidder, your earnest money deposit will be refunded to you. If you are the successful bidder, the earnest money deposit is credited toward your down payment. Depending on the asking price, earnest money deposits generally range from $500 – $1,000.

Benefits of Buying HUD Homes

According to HUD, some benefits to buying HUD homes include:

A real estate broker will prepare and submit your offer and deposit for you without charging you.
HUD pays up to 5 percent of the closing costs, saving you thousands.
You can move in faster if you purchase a HUD home eligible for FHA-insured mortgage because it has already been appraised.
HUD homes may be eligible for repair loans built into the mortgage and buyers may qualify for 3 percent down payments.

Maximize Curb Appeal

As you start spending more time outdoors this spring, no doubt your home’s flaws will become more visible. Get your home in shape now. Would new siding revive your home? Does your landscape date your home? Do you need a new roof? Maybe you just need a fresh coat of paint, clean or upgrade those windows, or install a more welcoming front door.

1. Siding

Today, there are a wide variety of options available, including much improved vinyl siding, not to mention metal, wood, and stucco.

The siding best suited for your home depends on many factors: which style best complements your home, how much maintenance you’re willing to do, and the climate where you live.

Vinyl: Holds up well over time and can retain its qualities for 40 years or more. Vinyl siding will not dent like aluminum siding, nor will it warp, rot, or chip like wood. Manufacturers offer a broad range of colors in various shades and styles.
Wood: With proper maintenance, wood siding will last for many years. Disadvantages include possible mold growth, wood rot, and pest infestation.
Stucco: Common in the southwest, advantages include a natural resistance to fire, long durability, and little needed maintenance.
Metal: Aluminum and steel siding systems look similar to horizontal wood siding, but don’t require as much maintenance.

2. Roofing

New roofing not only freshens up your home’s exterior, it’s also the most important part of your home’s weatherproofing and insulation system, and can save on heating and cooling bills.

Asphalt: Stronger, more natural-looking materials have made asphalt roofing a good, economical choice.
Metal: Usually manufactured in steel, copper, aluminum or stainless steel, modern metal roofing frequently carries a warranty of 50 years.
Wood Shakes: Tends to be more expensive, but greatly adds to a home’s appearance.
Slate: The most expensive roofing option, slate is usually on higher-end homes. It can last 50 years or more, but because it is brittle, may require more repairs.
Tile: Tile roofs initially cost a lot more to install than asphalt shingle or wood shake roofs, but they also last much longer, sometimes 50 years or more.

3. Exterior Painting

There are so many things to consider when choosing which color to repaint the exterior of your home. For some people this comes easily; for others, decorating or changing the exterior of their home is daunting and too expensive.

Some tips for choosing exterior paint colors:

Stay true to the traditional color scheme for your type of home.
A New England Salt Box looks great in blue-gray tones, while Victorian homes can be a variety of colors.
Preview your home in your chosen color.
Many paint stores now offer computer imaging so you can get an idea of the look of the colors you are considering.
Choose muted colors rather than brighter tones.
A large area of bright color can have a larger impact than you may want.
Check out other homes in your area.
Look at homes in your neighborhood or in decorating magazines. If you like a color, ask the homeowner to share the name and brand.

4. Windows

One of the more popular trends in home building and remodeling these days is adding more natural light with more—and larger—windows. Studies show that natural light has a positive effect on our well-being and adding more windows can open up a house, creating a more spacious-feeling room. And, while many homeowners think of windows as merely functional, they can also provide a key design element in any home.

Some of the newest trends in windows include:

Tubular skylights: The tubular skylight is more compact and easier to install than regular skylights and brightens homes more effectively than artificial light. They can also be fitted with internal light kits to double as electric lights at night.
Passive solar heating systems: Large, southern-facing windows can contribute to passive solar heating design by allowing solar radiation to help heat your home.
Window glazing: For ultraviolet light protection, glazing can protect home occupants as well as reduce the fading of upholstery and furniture. Glazing also improves a window’s insulation.
Low emissivity coating: Also known as Low-E coating, this reflects heat inside the home during the winter and blocks much of the heat in the summer, which saves money on utility bills.

5. Doors

One of the best ways to make a great first impression is with a custom door, which can add instant curb appeal to your home. Custom doors can be made of unique materials, clad in copper or aluminum, crafted from exotic woods or even recycling an interesting wood once designed for another use – people have made doors from antique pickle barrels, for example.
Need more ideas? You just need to open up your imagination–inspiration is all around:

Browse architectural and home magazines and websites.
Flip through to get an idea of what appeals to you and would best fit your home’s style. Check out DesignMine.
Look at other doors–especially out of your area.
Chances are the majority of homes in your area will be very similar. Take a drive one day and take note of the doors in more rural areas if you live in the city, or vice versa.
Visit architectural salvage warehouses and yards.
A great source of inspiration is the architecture of yesteryear. You can purchase and give new life to a door you find here or even have a replica made.
Get professional expertise.
If you’re stumped, go to the professionals for help. Custom door makers can offer you advice on all of your options and which style would best complement your home.

6. Landscape

An overgrown landscape gives the impression of an unkempt home, as well. One of the most cost-effective ways to customize a home to meet your needs and tastes, good landscaping will add value to your home and enhance your lifestyle.

Lawn and shrubs: Maintain your landscaping by keeping shrubs trimmed and weeding the area. You can also hire a lawn care professional to care for your lawn on a weekly to monthly basis, depending on the climate and your landscape’s needs.
Walkways: Keep walkways swept free of debris and the clutter of children’s toys. Not only does this look nicer, it prevents accidents from happening.
Outdoor lighting: Motion-activated lights can enhance security and ensure no one trips on the way to the front door. Spotlights can highlight trees and decorative features.
Fences: Fences can provide privacy and security, contain pets and children, and divide functional and visual spaces. Many fences now come in maintenance-free plastic in contemporary or traditional styles.

As you start spending more time outdoors this spring, no doubt your home’s flaws will become more visible. Get your home in shape now. Would new siding revive your home? Does your landscape date your home? Do you need a new roof? Maybe you just need a fresh coat of paint, clean or upgrade those windows, or install a more welcoming front door.

1. Siding

Today, there are a wide variety of options available, including much improved vinyl siding, not to mention metal, wood, and stucco.

The siding best suited for your home depends on many factors: which style best complements your home, how much maintenance you’re willing to do, and the climate where you live.

Vinyl: Holds up well over time and can retain its qualities for 40 years or more. Vinyl siding will not dent like aluminum siding, nor will it warp, rot, or chip like wood. Manufacturers offer a broad range of colors in various shades and styles.
Wood: With proper maintenance, wood siding will last for many years. Disadvantages include possible mold growth, wood rot, and pest infestation.
Stucco: Common in the southwest, advantages include a natural resistance to fire, long durability, and little needed maintenance.
Metal: Aluminum and steel siding systems look similar to horizontal wood siding, but don’t require as much maintenance.

2. Roofing

New roofing not only freshens up your home’s exterior, it’s also the most important part of your home’s weatherproofing and insulation system, and can save on heating and cooling bills.

Asphalt: Stronger, more natural-looking materials have made asphalt roofing a good, economical choice.
Metal: Usually manufactured in steel, copper, aluminum or stainless steel, modern metal roofing frequently carries a warranty of 50 years.
Wood Shakes: Tends to be more expensive, but greatly adds to a home’s appearance.
Slate: The most expensive roofing option, slate is usually on higher-end homes. It can last 50 years or more, but because it is brittle, may require more repairs.
Tile: Tile roofs initially cost a lot more to install than asphalt shingle or wood shake roofs, but they also last much longer, sometimes 50 years or more.

3. Exterior Painting

There are so many things to consider when choosing which color to repaint the exterior of your home. For some people this comes easily; for others, decorating or changing the exterior of their home is daunting and too expensive.

Some tips for choosing exterior paint colors:

Stay true to the traditional color scheme for your type of home.
A New England Salt Box looks great in blue-gray tones, while Victorian homes can be a variety of colors.
Preview your home in your chosen color.
Many paint stores now offer computer imaging so you can get an idea of the look of the colors you are considering.
Choose muted colors rather than brighter tones.
A large area of bright color can have a larger impact than you may want.
Check out other homes in your area.
Look at homes in your neighborhood or in decorating magazines. If you like a color, ask the homeowner to share the name and brand.

4. Windows

One of the more popular trends in home building and remodeling these days is adding more natural light with more—and larger—windows. Studies show that natural light has a positive effect on our well-being and adding more windows can open up a house, creating a more spacious-feeling room. And, while many homeowners think of windows as merely functional, they can also provide a key design element in any home.

Some of the newest trends in windows include:

Tubular skylights: The tubular skylight is more compact and easier to install than regular skylights and brightens homes more effectively than artificial light. They can also be fitted with internal light kits to double as electric lights at night.
Passive solar heating systems: Large, southern-facing windows can contribute to passive solar heating design by allowing solar radiation to help heat your home.
Window glazing: For ultraviolet light protection, glazing can protect home occupants as well as reduce the fading of upholstery and furniture. Glazing also improves a window’s insulation.
Low emissivity coating: Also known as Low-E coating, this reflects heat inside the home during the winter and blocks much of the heat in the summer, which saves money on utility bills.

5. Doors

One of the best ways to make a great first impression is with a custom door, which can add instant curb appeal to your home. Custom doors can be made of unique materials, clad in copper or aluminum, crafted from exotic woods or even recycling an interesting wood once designed for another use – people have made doors from antique pickle barrels, for example.
Need more ideas? You just need to open up your imagination–inspiration is all around:

Browse architectural and home magazines and websites.
Flip through to get an idea of what appeals to you and would best fit your home’s style. Check out DesignMine.
Look at other doors–especially out of your area.
Chances are the majority of homes in your area will be very similar. Take a drive one day and take note of the doors in more rural areas if you live in the city, or vice versa.
Visit architectural salvage warehouses and yards.
A great source of inspiration is the architecture of yesteryear. You can purchase and give new life to a door you find here or even have a replica made.
Get professional expertise.
If you’re stumped, go to the professionals for help. Custom door makers can offer you advice on all of your options and which style would best complement your home.

6. Landscape

An overgrown landscape gives the impression of an unkempt home, as well. One of the most cost-effective ways to customize a home to meet your needs and tastes, good landscaping will add value to your home and enhance your lifestyle.

Lawn and shrubs: Maintain your landscaping by keeping shrubs trimmed and weeding the area. You can also hire a lawn care professional to care for your lawn on a weekly to monthly basis, depending on the climate and your landscape’s needs.
Walkways: Keep walkways swept free of debris and the clutter of children’s toys. Not only does this look nicer, it prevents accidents from happening.
Outdoor lighting: Motion-activated lights can enhance security and ensure no one trips on the way to the front door. Spotlights can highlight trees and decorative features.
Fences: Fences can provide privacy and security, contain pets and children, and divide functional and visual spaces. Many fences now come in maintenance-free plastic in contemporary or traditional styles.

Should You Know About Second Houses and Investment Properties

Second homes are a great choice whether you’re looking for a summer retreat or an investment property. There is a laundry list of considerations to think about before making such a huge investment, however. Make sure you’re informed about all your options before you buy.

A Smart Purchase

There are two reasons most homeowners buy a second home: as a vacation property or investment. Regardless of what you use your new house for, any second home can easily be both of the above. Real estate is one of the safest and most profitable long-term investments a person can make. And if you’re careful about where you purchase your new home, there’s no reason it can’t be a weekend getaway for you and a money making rental property as well!

Rent It or Not?

A smart purchase in a desirable area means your new vacation home can double as a place to rent out to others when you’re away. By charging a reasonable rate to pre-screened, short term renters, you can easily make enough to pay for your new mortgage payments and even pocket a little bit extra on the side. Of course, not every homeowner wants to deal with the hassles of trusting their home to strangers. If that sounds like you, don’t fret. By being smart about where you buy and what you purchase, you’ll end up with a home that is attractive to both renters and future buyers. Either way, purchasing a second home is a win/win proposition.

Additional Considerations

Here are a few ideas to consider as you begin your search for the perfect new house:

– Look for homes with great views and ones that are close to parks and open space. Not only will these features make them more attractive to renters looking for a vacation getaway, but they also increase the re-sale value of your home. Unobstructed views of mountains and oceans can add up to 60% to a home’s value, while proximity to parks and open space can raise property values up to 20%.
– Calculate possible rental rates before you buy, whether you plan to rent or not. You might change your mind later about renting out your home when your away, but even if you don’t, a house that demands higher rent makes it more attractive to future buyers.
– Think about selling your current home and buying two new homes! If you’ve been paying down your mortgage and have lived in your current home for a while, think about using the equity you’ve built up in your current residence to help purchase your second property. And if you’re close to retirement and the kids have all flown the coop, think about downsizing to a smaller home for your primary residence as well. You could easily end up owning two homes for about the same price you were paying for the first!
– Look for a Low Maintenance Home. This is important for several reasons. For starters, you won’t be there all the time to keep up on maintenance chores, and when you are there you won’t want to waste your vacation working on the house. Secondly, most vacation homes are in areas where the elements take their toll. Whether it’s a seafront property or a mountain getaway, these climates tend to wear on a house quicker than in other areas. Purchasing a solid home built with low maintenance materials will ensure your time and money are spent on nights on the town instead of on mounting repairs.