The right HUD-owned property can offer a tremendous value to Metro Atlanta home buyers who are approved for an FHA Mortgage of up to $334,000 but have limited funds for the down payment. There is vast misinformation surrounding these types of real estate transactions that frequently leads to confusion, frustration or abandonment of the decision to buy entirely. Time, resilience and the expertise of an experienced local real estate agent are a few of the ingredients in the recipe for success. Below, please find answers to some of the myths and questions that buyers have most frequently with hopes that HUD-owned properties in Metro Atlanta will be considered as the viable options that they are to those with limited funds for the down payment.
Myth #1: HUD-owned properties are usually dilapidated properties in run-down areas.
Home buyers have purchased HUD-owned properties in newer communities in areas where there is a significantly higher quality of life all over Metro Atlanta. Granted, some of these properties have needed work, but many buyers have been pleasantly surprised to find these properties in good condition. Some credit-eligible, FHA approved home buyers have even taken advantage of various repair loans available replace the carpet, appliances and complete other deferred maintenance.
Myth # 2: HUD will make the repairs to the property.
HUD-owned properties are sold strictly as-is and no repairs may be made to a HUD-owned property under any circumstance prior to settlement.
Myth #3: HUD-owned properties can be purchased for as little as $100.
Home buyers who are pursuing a HUD-owned property using an FHA Mortgage may offer as little as $100 down on their loan. Please be mindful, however, of the competitive bidders with similar interests in the same property who will likely bid above list price. The winning bidder must bring the difference between their bid amount
and the list price to settlement in addition to the upfront mortgage
insurance premium (1.75% of the loan amount), optional fees to connect
the utilities, pay closing costs and to conduct the home inspection.
The earnest money of up to $1000 paid upon notification of a winning bid
may be applied to these fees, but buyers should plan for the extra
Myth #4: Any real estate agent can help buyers buy a HUD-owned property.
Brokerages who are registered with HUD as selling brokers may sell HUD-owned properties. In addition, HUD transactions are very different from most others closed in Metro Atlanta, involving unique HUD offer documents, addenda, timelines and more. Home buyers should, therefore, be certain that their agent has had both the most recent training and experience necessary to successfully close on a HUD-owned property transaction.
Myth #5: Any lender will participate in the HUD $100 Down Program.
Home buyers should confirm that their lender does, in fact, participate in this program. While many do, others will “pretend” to be unfamiliar with this widely used program for FHA approved borrowers.
Myth #6: Down payment assistance cannot be used along with the HUD $100 Down Program.
Down payment assistance may be used to pay closing costs in transactions involving HUD-properties, but the buyer must still pay any differences between their bid price and the list price of the property from their own funds.
Myth #7: HUD-owned properties can only be purchased for owner-occupancy.
Owner-occupants are the highest priority, but HUD-owned properties are available to investors (on the 31st day after market entry), government and non-profits agencies.
Myth #8: The list price is the price for everyone.
The prices of HUD-owned properties are negotiable, but are often available in designated areas at reduced prices to peace officers, educators, firefighters, emergency medical technicians, nonprofits and local governments.
Myth #9: The buyer is all in with no way out once the contract is returned signed by HUD.
Owner-occupant purchasers may request that the sales contract be canceled if, within 15 days of
HUD's acceptance, the property is inspected by a professional home inspector who discovers a structural, roof, system defect, or non-compliance with local codes, zoning, or building requirements that was not previously disclosed that HUD elects not to correct. HUD has also been cooperative when lenders have determined that winning bidders were unable to close on their transaction due to problems obtaining a mortgage. In these and other cases, HUD has agreed to terminate the agreement and return and return the buyers earnest money deposit.
Myth #10: HUD transactions are far too complex to close within a short time frame.
This challenge can be overcome with patience, flexibility in the choice of property location, budgeting to overbid for the right HUD-owned property and by working with the right team of professionals. The right real estate agent knows how to search for HUD-owned properties, how to help a buyer win a bid, how to help get the property inspected and how to work with a lender to get the transaction closed in a timely manner.
Transactions involving HUD-owned properties can help home buyers achieve their American Dream of Homeownership without a large down payment. While anxiety is part of the smoothest real estate transactions, knowing what to expect from all parties involved in the process can ease the path to home ownership. If you are not working with a real estate agent, please call (678) 775-2677 or write today for more information and please stay up to date in changes in down payment assistance by following Atlanta Down Payment Assistance on Facebook.
Associate Broker, REALTOR®, Certified Distressed Property Expert, Certifed Affordable Housing Counselor
Keller Williams Realty Atlanta Partners