HUD, Are They Insane ?

[Joe Birrell (NY)]

Just back from resale of HUD owned foreclosure, all boarded up, real rat hole. There are no functional baths or kitchens (2 family, frame, circa 1920). Every component needs repairs, plus heavy external depreciation.

Broker claims it is an "as-is" sale and HUD will not be doing any repairs.
It was last listed for $185,000 (should sell as-is at $135,000), buyer submitted bid to HUD for $198,000 ! (asking for copy of contract !).

What's the deal here ? If it was an origination loan FHA/HUD would expect it to be in acceptable condition, with no major repairs, inspite of an "as-is" contract, not to mention VC sheets, etc. Am I missing something here ?

 

[Ron in AR]

Joe,

Here's the way I understand it: If the house needs more than $5,000 in repairs HUD will sell "as is". You can pay cash, get a conventional loan, whatever, they don't care but it won't be an FHA insured loan. They will provide a list of repairs needed on the Homebuyers Notice but you buy as is.

If the house needs less than $5,000 in repair and you want to get an FHA insured loan, they will escrow for repairs and you complete the work after closing. You get your escrowed money after a final inspection is completed by an FHA appraiser.

Hope that makes sense.

Ron in AR

 

[Leon Stewart]

There was no indication as to whether this was a 203K or not since that's what it sounds like, but it could be an unimformed buyer. Unless the buyer is paying cash, the Lender will evaluate the feasibility of any Loan amount after viewing the Appraisal Report.

Some buyers go this route if the total investment doesn't significantly exceed similar values in the area while they are getting a modernized updated structure for not much more. They usually overlook the fact that they end up going through a lot of trouble with few benefits.

leart3

 

[Don Clark]

8

Ron:

Exactly. I just did one where there was slightly less than $5,000 worth of repairs(my estimate). I did the full VC thing. The only thing the DEU asked me to do on a final was reinspect with heat and AC operational, and the water on. I did that. No matter that bathroom fixtures were missing, plumbing broken, etc.

Don