HUD Homes, Or How the Government Becomes a Homeowner and Foreclosure Seller

If you are like many, you really don't understand the term HUD houses, or HUD foreclosures. Those two terms make it sound like it has something to do with the home itself, or its quality. Nothing could be further from the truth. HUD houses are just like any other house on your street, in your town or anywhere else in the country. In fact, most homes in the country that have mortgages are HUD homes. HUD stands for US Department of Housing and Urban Development, and they back FHA-insured loans for banks so that banks can be more secure in giving deserving people home loans.

You can't get a loan from the government, or buy a home from HUD exactly. What happens in a normal home sale, is the bank gives the homeowner a mortgage note, and the government backs the note so if something happens, the bank isn't left hanging for the lost money. However, when a homeowner defaults on the loan, that puts the government in an unusual spot. They suddenly own a home.

Those homes are government foreclosures and are often sold at a deep discount in order to recoup some of the lost value. Because of the low cost of most HUD houses, people think they are in bad shape, but that's not necessarily the case. While it can happen that foreclosure homes for sale are left in bad condition because the reason the owner defaulted is they couldn't afford the mortgage, or to keep up with maintenance, most of the time HUD houses are hard to tell apart from any other home.

One misconception the buying public often has is that HUD houses are ridiculously cheap. While they are a good value, government foreclosures sell for fair value according to the area they are at, and the condition they are in. Beware of "too good" a deal unless you are very handy at construction and home repair. It's true with any real estate purchase, and good preparation will help you whenever you are buying a home.

When you are considering buying HUD houses that are government foreclosures you have to make sure you inspect it thoroughly. There is no guarantee, and the homes are sold the way they stand. However, you are encouraged to get a property inspection done. You should also perform a title check. The listing’s real estate agent can talk you through the process so you don't miss any steps, and can be assured of a safe and happy transaction.

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