In Onondaga County, the vast majority of HUD foreclosures are in the City of Syracuse.
It seems like a lot of them are on the internet as a "for sale" property long after they have been sold. I've been contacted several times by people interested in a HUD home that were sold months ago.
These are usually not in live in condition - there are repairs that have to be made. There is a sheet called a PCR (property condition report) for each house, which briefly outlines the condition.
Many HUD homes in Syracuse have had frozen pipes. The water is shut off, and if the PCR says there’s plumbing problems you are not allowed to turn the water on for an inspection. So you really have no way of knowing the extent of the damage.
You are allowed to turn the power and gas on for a home inspection, but you will probably have to give a deposit to the management company.
You put in a bid through a HUD certified broker. This is entirely online. Then, like a regular offer, they can accept, reject or counter offer.
If they counter, you have one day to get your bid in again. If your bid is rejected, you can bid again.
After a bid is accepted, your agent has 48 hours to get the contract to HUD. They are very picky on the paperwork, and there is a lot of it. Paperwork must be filled out in blue pen with no mistakes. There has to be an original letter from the lender signed in blue ink. If it is cash you just need proof of funds. A certified check or money order must be sent in with the contract. If it’s under 50k, check is for 500. Over 50k, check is for 1000. The contract is usually sent by overnight mail.
You don’t send the contract to HUD, it is sent to one of their many management companies. The various management companies may have slightly different policies.
This is the point where it differs according to the various classifications of houses.
There are three types: Uninsured (U), Insured with Repair Escrow (IE), and Insured (I). IE is the most common type that I see here in Onondaga County. I haven’t been keeping records of it, but right now we have 10 houses on the HUD list, and 8 of them are IE and 2 are UI. There are no insured houses right now and I can’t recall seeing one.
It’s hard to find out this information on their site. It would be nice if they would just say on the listing exactly what the classifications mean.
Uninsured is in very poor shape. This is pretty much for cash buyers. Uninsured buyers do not have a chance to get out of the contract due to a home inspection, though they can have one if they want.
Insured with Repair Escrow is much more complected. If you are getting a loan, it is a 203b with repair escrow. The repair escrow is an amount of money that the buyer must deposit into an escrow account with their lender. Some lenders require 1.5 times the amount of the repair escrow. Then you have to complete certain work within a certain time period, and they will give you the money back from the repair escrow. You must turn in bills from a contractor.
You can also get a 203K loan, which is a more common type of loan. They loan you the money for the purchase and the repairs. They have a list of what repairs will be done, and you will have to get each stage of the project approved before they will give you more money.
For this type of property, if you are an owner occupant you have a 15 day window from when the contract was signed to get a home inspection done. You can get out of the contract if the home inspection finds serious problems in the roof, mechanical, plumbing or foundation. However, the water is not allowed to be turned on if there are plumbing problems so usually you wouldn’t be able to use that.
If you are an owner occupant with a loan, you may be able to use not being approved for your loan as a reason to get out of the contract with your deposit back.
You are allowed to have a mold inspection, but cannot use the presence of mold as a reason for getting your earnest money back.
Here is a list from one management company - there may be slight differences in other management companies policies.
Investor Purchasers:
Uninsured Sales: 100% of the deposit will be forfeited to HUD for failure to close regardless of the
reason.
Insured Sales: 50% of the deposit will be forfeited to HUD for failure to close if the purchaser is
determined by HUD to be an unacceptable buyer.
100% of the deposit will be forfeited to HUD if the sale fails to close for any other reason.
Owner-Occupant Purchasers
Return 100% of the deposit when:
• There has been a death in the immediate family (purchaser, spouse or children living in the same
household).
• There has been a recent serious illness in the immediate family that has resulted in significant
medical expenses or substantial loss of income, thus adversely, affecting the purchaser's
financial ability to close the sale.
• There has been a loss of job by one of the primary breadwinners, or a substantial loss of income
through no fault of the purchaser.
• For an FHA insured sale, HUD (or a D.E. underwriter) determines that the purchaser is not an
acceptable borrower.
• For an uninsured sale, the purchaser was pre-approved for mortgage financing in an appropriate
amount by a recognized lender and, despite good faith efforts, is unable to obtain mortgage
financing. "Pre-approved" means a commitment has been obtained from a recognized mortgage
lender for mortgage financing in a specified dollar amount sufficient to purchase the property.
• There is other equally good cause, as determined by management company, in keeping with the spirit and intent of the above policy.
Return 50% of the deposit when:
For an uninsured sale, despite good faith efforts by the purchaser, there is an inability to obtain a
mortgage loan from a recognized mortgage lender.
Forfeit 100% of the deposit when:
• No documentation is submitted.
• Documentation fails to provide an acceptable cause for the buyer's failure to close.
• Documentation is not provided within a reasonable time following contract cancellation.
I have never seen or dealt with an Insured property, so I’m not going to write about them.
I think that HUD homes are probably best for people who are experienced rehabbers and able to take a gamble with the condition of the house. It’s really not a good choice for someone looking to buy their first home, especially if they have no experience in home repair or plumbing.
If you are an experienced contractor who is used to rehabbing properties, you may be able to get a great deal on a house.
If you are looking to buy a house and want to get a good deal on one but have it be in better condition, contact me. There are bank foreclosures, short sales, and other deals to be had out there which are a lot easier to deal with and carry much less risk.
Call Melissa at 315-908-2287 or email syracusemel@gmail.com
Many HUD homes in Syracuse have had frozen pipes. The water is shut off, and if the PCR says there’s plumbing problems you are not allowed to turn the water on for an inspection. So you really have no way of knowing the extent of the damage.
You are allowed to turn the power and gas on for a home inspection, but you will probably have to give a deposit to the management company.
You put in a bid through a HUD certified broker. This is entirely online. Then, like a regular offer, they can accept, reject or counter offer.
If they counter, you have one day to get your bid in again. If your bid is rejected, you can bid again.
After a bid is accepted, your agent has 48 hours to get the contract to HUD. They are very picky on the paperwork, and there is a lot of it. Paperwork must be filled out in blue pen with no mistakes. There has to be an original letter from the lender signed in blue ink. If it is cash you just need proof of funds. A certified check or money order must be sent in with the contract. If it’s under 50k, check is for 500. Over 50k, check is for 1000. The contract is usually sent by overnight mail.
You don’t send the contract to HUD, it is sent to one of their many management companies. The various management companies may have slightly different policies.
This is the point where it differs according to the various classifications of houses.
There are three types: Uninsured (U), Insured with Repair Escrow (IE), and Insured (I). IE is the most common type that I see here in Onondaga County. I haven’t been keeping records of it, but right now we have 10 houses on the HUD list, and 8 of them are IE and 2 are UI. There are no insured houses right now and I can’t recall seeing one.
It’s hard to find out this information on their site. It would be nice if they would just say on the listing exactly what the classifications mean.
Uninsured is in very poor shape. This is pretty much for cash buyers. Uninsured buyers do not have a chance to get out of the contract due to a home inspection, though they can have one if they want.
Insured with Repair Escrow is much more complected. If you are getting a loan, it is a 203b with repair escrow. The repair escrow is an amount of money that the buyer must deposit into an escrow account with their lender. Some lenders require 1.5 times the amount of the repair escrow. Then you have to complete certain work within a certain time period, and they will give you the money back from the repair escrow. You must turn in bills from a contractor.
You can also get a 203K loan, which is a more common type of loan. They loan you the money for the purchase and the repairs. They have a list of what repairs will be done, and you will have to get each stage of the project approved before they will give you more money.
For this type of property, if you are an owner occupant you have a 15 day window from when the contract was signed to get a home inspection done. You can get out of the contract if the home inspection finds serious problems in the roof, mechanical, plumbing or foundation. However, the water is not allowed to be turned on if there are plumbing problems so usually you wouldn’t be able to use that.
If you are an owner occupant with a loan, you may be able to use not being approved for your loan as a reason to get out of the contract with your deposit back.
You are allowed to have a mold inspection, but cannot use the presence of mold as a reason for getting your earnest money back.
Here is a list from one management company - there may be slight differences in other management companies policies.
Investor Purchasers:
Uninsured Sales: 100% of the deposit will be forfeited to HUD for failure to close regardless of the
reason.
Insured Sales: 50% of the deposit will be forfeited to HUD for failure to close if the purchaser is
determined by HUD to be an unacceptable buyer.
100% of the deposit will be forfeited to HUD if the sale fails to close for any other reason.
Owner-Occupant Purchasers
Return 100% of the deposit when:
• There has been a death in the immediate family (purchaser, spouse or children living in the same
household).
• There has been a recent serious illness in the immediate family that has resulted in significant
medical expenses or substantial loss of income, thus adversely, affecting the purchaser's
financial ability to close the sale.
• There has been a loss of job by one of the primary breadwinners, or a substantial loss of income
through no fault of the purchaser.
• For an FHA insured sale, HUD (or a D.E. underwriter) determines that the purchaser is not an
acceptable borrower.
• For an uninsured sale, the purchaser was pre-approved for mortgage financing in an appropriate
amount by a recognized lender and, despite good faith efforts, is unable to obtain mortgage
financing. "Pre-approved" means a commitment has been obtained from a recognized mortgage
lender for mortgage financing in a specified dollar amount sufficient to purchase the property.
• There is other equally good cause, as determined by management company, in keeping with the spirit and intent of the above policy.
Return 50% of the deposit when:
For an uninsured sale, despite good faith efforts by the purchaser, there is an inability to obtain a
mortgage loan from a recognized mortgage lender.
Forfeit 100% of the deposit when:
• No documentation is submitted.
• Documentation fails to provide an acceptable cause for the buyer's failure to close.
• Documentation is not provided within a reasonable time following contract cancellation.
I have never seen or dealt with an Insured property, so I’m not going to write about them.
I think that HUD homes are probably best for people who are experienced rehabbers and able to take a gamble with the condition of the house. It’s really not a good choice for someone looking to buy their first home, especially if they have no experience in home repair or plumbing.
If you are an experienced contractor who is used to rehabbing properties, you may be able to get a great deal on a house.
If you are looking to buy a house and want to get a good deal on one but have it be in better condition, contact me. There are bank foreclosures, short sales, and other deals to be had out there which are a lot easier to deal with and carry much less risk.
Call Melissa at 315-908-2287 or email syracusemel@gmail.com
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