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HUD homes in Iowa Polk County HUD homes Dallas County HUD homes Warren County HUD homes
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HUD homes can offer an affordable alternative to homebuyers and investors seeking value in the Polk, Dallas, Japser, Madison and Warren County area. Often buyers can expect strong equity from the purchase of a HUD owned property. Read here to understand the basics of purchasing HUD homes or HUD townhomes, condos, acreages or investment property in the greater Des Moines area.
There is a lot of interest from the public in HUD homes, or homes offered by the Department of Housing and Urban Development. The process of buying HUD homes changed in October 2010 and this report is meant to give prospective HUD home buyers a broad overview of the process as it now exists.
HUD homes come on the market as a result of default on FHA mortgages by home owners. Lenders originate the mortgage and which if it is not paid they foreclose on. HUD then steps in and buys the property for the debt. FHA used to be one of the only lending programs available to buyers which did not require a significant downpayment but it fell out of popularity with the explosion in 0 down options a few years back. These days however FHA is back in favor with many homes in the Des Moines area being purchased with FHA loans especially by first time buyers.
HUD does not like the term "foreclosure" to be associated with HUD properties but that is in effect what they are. HUD acquires the properties through the mortgagee's default, and then resells them through a management company. In the case of Iowa, the company is Matt Martin Real Estate which manages HUD's portfolio of homes but lists them with a MLS participating broker.
Priority bidding is first given to owner occupants. For example if a HUD home comes on the market on the 8th, owner occupants may have until midnight of the 22nd to submit a bid on the property. Bids are collected throughout the initial period. It does not matter if you are the first bid or the fifteenth, if you place the bid on the first day, or at 11:59PM on the last day. Exact bidding dates for all properties can be found on HUD's website at http://www.hudhomestore.com.
Buyers must use an agent with a brokerage that has made an application for a special registration number. Buyer agents submit bids online and agents are notified by email if the buye's' bid is selected. Following our earlier scenario, this would be on the 23rd. Even though the bids are submitted electronically, buyers must fill out a complete offer package in advance of the bid submission. Earnest money is required in the amount of $500 up to $50,000 in listed value, $1000 over $50,000 in listed value.
If an acceptable owner occupant bid has not been placed during the priority period,the HUD home is opened for general bidding meaning investors may now bid on the property. Bids are then taken daily during the business week until the property is sold.
Procedures are very precise for offers on HUD homes and must be followed to the letter. If a bid is accepted, a completed contract with all accompanying documents must be received by the closing agent within 48 hours of notication of acceptance. If the offer is not received in 48 hours, the home will go back on the market. If the paperwork is not done correctly HUD may reject the offer and place the property back up for bidding. In HUD's own words: ****If your bid package is not received within 48 hours after the date the bid is awarded or your contract corrections are not received within 24 hours, your bid will be cancelled. No Exceptions.
HUD homes are sold AS IS without warranties or repairs. HUD does provide a Property Condition report however, which is the result of observations made by a HUD selected inspection company. Succesful bidders are allowed a 15 day period in which to inspect the property, and may have the utilities turned on at the buyer's expense. If the inspection is acceptable, the closing will proceed as normal. HUD requires that the buyer agree to a 45 day close, but the property may close sooner or later depending on circumstances. Buyer's can back out as a result of the inspection, but they will likely forfeit their earnest money in such a scenario unless they are using FHA financing.
Buyers may pay cash of course or use one of three types of financing. Conventional (not FHA), FHA, or FHA with escrow. Conventional would be a loan from any lender not FHA. An FHA mortgage would be through an FHA approved lender. FHA with escrow is for buyers wanting to purchase a home needing repairs to be livable, but whom are using FHA financing, which normally has stringent requirements that the home be in very good condition. The amount of repairs would be determined by the buyer soliciting bids from licensed contractors, and having the bids approved by the lending institution. The buyer would then get a loan for the home and the repairs, but the repair money would be held in "escrow" by the lender until repairs are completed. Repairs under this scenario would need to be completed in 3 months.
A great thing about HUD homes is that HUD will cover the buyer's closing costs with an acceptable offer and often buyers can get homes at a significant discount to the market prices. This can make the home very affordable. HUD also offers Property Improvement Loan Insurance for financing repairs.
I have greatly simplified the HUD home buying process in the above paragraphs. There are too many ins and outs to explain it in its entireity in this report. The process is not simple so it is crucial to work with an agent such as myself who has had offers accepted and delivered all the required paperwork in line with HUD regulations.
If you have any questions about the HUD home buying process, I would look forward to providing you information, helping you find a home, and writing and delivering an acceptable offer. You may use the form below to contact me with questions, or to provide an address of a property for which you would like more information.
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