We all know there are more foreclosed homes in the market and many thousands going to flood the market in coming years. This situation is expected to keep the real industry under bay and home prices are going to be go downward spirial. It is bad news for many of us including home buyer, sellers and realtors. In this instance, we keep hearing about different goverment plans from their think tank to revive the market. The recent one being a possible solution to rent out the foreclosed homes instead of keeping in the market to reduce those inventory which help the new homes prices and sales.

While everyone is trying to solve the problem to help the market to come by attracting more buyers or finding ways to get rid of foreclosed properties, HUD is actually doing the opposite. It just scaring away home owners and investors who want to buy HUD foreclosed with their cumberson government procedures and formalities. On top of it, they also punish the Investor buyers with penalities if they cannot close the deal even though the issue is on the seller(HUD) side. In the past months, I have many frustrated buyers whom I help to make offer in Northwest Houston area. The contract was terminated either because of difficult and unfriendly process or because of the bad title issues. Buyer only realizes the property title is bad from previous closing by HUD after they spend all their efforts and money to get the property inspected and financed when their file is opened with title company. You might wonder why is HUD putting those homes into market if they don’t know have good title or hope to get one?. Isn’t it disgraceful? We were surprised by HUD mishaps that they can sell properties even without proper deed or clear title from previous closing and also with issues in the house which cannot even pass inspection for financing purposes.

To avoid all the hiccups, here are few bottlenecks with HUD properties so you can be aware of them and be an educated buyer when dealing with HUD foreclosed homes.

1. Be clear whether you want to buy as owner occupant or investor if you put the bid after the open period.
2. Be aware that as a Buyer(owner occupant or investors) you are responsible to turn on the utilities on the house which you didn’t even own in order to do the inspection. And they don’t make easier. It has several steps to start with, buyer needs to get authorization from the field service company authorized by HUD, pay fees for authorization just to get a letter to turn on the utilities. Next call the utility companies to turn them on. Buyer again needs to pay each utility company their respective deposits and fees to turn it on. Once inspection, you have to turn off all utilities. Buyer is prone to lose their deposits in certain utility companies and also endup paying high fees for expediate service.
3. After inspection if you decide not to continue, your earnest money is reimbursed only if you are owner occupant and you have to show the proof and valid reason. If you are investor, don’t think about getting earnest money back.
4. Title is not guaranteed until file is open and title committment is ordered from Title company. If there is a problem with the Title, you just have to wait to be cleared and you have to apply for extension for $375 fee or they will waive it sometimes. If you are lucky to get it cleared, you don’t know whether the property is as it when you signed the contract. If a/c is gone and decide to not close, you will your earnest money.So you are taking those chances.
5. Closing has to be completed within 45 days after contract accepted. If financing delays, buyer needs to file for extension which will be for 15 days with $375 charge. You just have to keep extending until you complete the close and keep paying the extension fees everytime.
6. For any reasons closing cannot happen which is common these days because financing falling apart. In that situation, whether you are any type of buyer you will lose your earnest money.

When I told my co-realtors that I deal with HUD properties they looked at me like a wierd person and stayed 1 mile away from me. Now I know the reason for the damn look. They don’t want to deal with me because I am dealing HUD homes. Many realtors don’t deal with HUD homes just because there is only 50% of chance of closing the deals and process really frustrates clients. To avoid losing clients and spending to much time and effort all go to vain at the end, realtors and buyer are reluctant these days to go with HUD foreclosed properties even it is a great deal. Whether you are Buyer or Realtor, please be wary and take the above things into consideration before jumping in buying HUD homes. The deal may be good but organization you are dealing with thinks they are giving away houses for free and act like throwing bone at us. So be cautious and take every step carefully.

About Vijaianand Thirnageswaram

I am a Proud Realtor of Texas, trying to guide and help clients to find their dream home and educate them to buy them for right price. I am also a Candidate for CFP who has more financial knowledge which allows me share and educate clients in any financial decision making process.

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