The public perceives HUD homes have extra value. Value added if you will. And the public is right.

     One of the primary advantages is that HUD will automatically pay 3% of the buyers' closing costs if they are getting a loan to purchase the house.

     As a further favor, HUD will share at no cost their as-is appraisal with the buyers' lender. Even if the sales price has been reduced thus giving the buyer built in equity.

      In addition, HUD pays the entire escrow fee. Some REOs require the buyer to pay all of this fee. A traditional seller (your neighbor) pays one half of the escrow fee.

      Since HUD is a proponent of community stability through home ownership, buyers who want to live in the house are given first choice through an exclusive 30 day bidding period.

      Owner occupants are defined as persons who will agree to live in the house for at least 1 year and who have not purchased a previous HUD home within the last 2 years.

      In addition to owner occupants, this bidding period is open to certain non-profit corporations and government entities. The sealed bids are accumulated for 10 days and opened and reviewed by HUD on the 11 the day in the order in which they were received. HUD responds in 24 to 48 hours after the bid opening date.

     Some HUD homes have a repair escrow. These homes are fully financeable with an FHA loan. The repairs are determined by the appraiser and a field review by the board listing broker and are limited to $5000.00. The repairs must be done after the escrow closes and are added to the balance of loan. If the buyer pays cash for the property, the repair escrow is eliminated.

     These homes are identified with an IE mark by the listing on the HUD website where the repairs are itemized.

    When paying cash for a HUD home, it is important to note that the amount of the closing costs paid by HUD for the buyer will not add up to 3% because there is no loan involved.  

      They will also pay for a home protection plan. Another benefit because a lot of REO companies (banks) won't pay for these.

      Regarding the appraisal, some banks insist on having their own so will not use the HUD appraisal.

     The final advantage is that you can shop for HUD homes listed across the country in the comfort of your own residence by going to HUDHomestore.com. This national MLS for HUD homes, lists all homes available by state and city and identifies which ones have the repair escrow (IE), which are fully financeable (IN), which ones are cash only (UI) and (UK) for the ones eligible for 203K loans.

         Carol J. Wilson is a Ridgecrest real estate broker for Wilson & Associates Real Estate Services. She may be reached at: 760-446-5959.