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The Skinny on Buying a HUD Income Property

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Buying a HUD income property is a little different than buying a property through regular MLS channels.  HUD houses are those that were insured by the FHA and have since gone into foreclosure.  Most often these properties are sold at a physical or virtual real estate auction.  You can get some excellent bargains with this approach but like I said it is a little different than a standard buy/sell transaction.  If you are looking to go down the proverbial rabbit hole on this one, here are just a few things to keep in mind.

First, although these properties can be acquired for long term investment purposes as well as primary residences, buyers who want to actually live in the home receive priority.  As such, they usually receive preferable bidding terms and also a longer period of time in which to make an offer.  For example, HUD properties will usually be required to be on the market for 10 business days before investors can jump into the mix.

Also, keep in mind that you won’t be able to lowball every HUD house in sight because for the most part only offers that are close to market value will be accepted.  Think of this as the reserve price that the banks have set.  Yes a property that has been sitting for a long time without being sold could probably be purchased for well below market value, but properties in this situation are almost always complete dumps.  This last point is particularly critical because HUD houses are always sold as-is and as such you will generally not be able to inspect them in a thorough manner prior to making an offer.

Finally and perhaps most importantly, you will need a rental property agent accustomed to participating in HUD transactions.  One reason is that HUD homes are listed in specific, nontraditional sales channels and therefore you will want an agent who actually knows where to find these listings.  Additionally, oftentimes the bidding is done electronically and only your agent will be authorized to access the system. Finally, an experienced agent will hopefully know all the HUD property sales rules in your state and thus will be able to efficiently guide you through the process.

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