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Bank foreclosures can become government foreclosures if the loan is backed by a government agency such as the Department of Housing and Urban Development (HUD) or the Department of Veterans Affairs (VA). In that case the government agency would be responsible for selling the property.
VA vs. HUD Foreclosed Homes – What’s the Difference
Where a HUD home for sale is the result of a foreclosed FHA insured loan, a VA home foreclosure is the result of a foreclosed government guaranteed veteran (VA) loan.
The Department of Veterans Affairs (VA) acquires properties as a result of foreclosures on VA-guaranteed and VA-financed loans. These acquired properties are marketed for sale through Bank of America.
The process of buying VA foreclosed homes and HUD homes is similar in some ways and a lot different in other ways. VA home foreclosures and HUD homes are both listed on local MLS systems by real estate agents but HUD homes have a 10 days waiting period before offers are accepted, VA foreclosed homes no longer have a ten day waiting period.
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Unlike HUD homes, owner-occupants don’t have an advantage over investors in submitting offers for VA homes for sale. Owner-occupants and investors are treated the same when making offers for VA foreclosed homes.
HUD homes use an on-line bidding (auction) system where there is very little contact between the listing agent and your buyer agent. You submit a bid and the acceptance of the bid is all done on the computer, no human contact. | Making an offer on a VA home loan foreclosure is similar to making an offer on a seller-owner property. Although your buyer agent can get all the necessary offer forms on-line at the Bank of America website, all offers must be sent to the listing agent. The listing agent then submits the offer to Bank of America.
If an offer is not accepted on a VA home for sale, VA will counter offer just like a seller-owner would do. The process of getting an accepted agreement can be slower than bidding on HUD homes.
Just like HUD homes, VA foreclosed homes are sold in “AS-IS” condition. VA homes for sale have the reputation of being in better shape than HUD homes. The theory is that FHA makes loans to almost any one and VA are limited to veteran loans. The reality is, it doesn’t matter if it’s a VA or HUD foreclosed home – some have been trashed and other ones are in move-in condition.
VA homes for sale can be great way of finding a bargain home to live in or for an investment.
Buying a VA Foreclosed Home
VA foreclosures represent a unique opportunity for both home buyers and investors to purchase real estate at a substantial discount. They were last owned by United States veterans who used their VA entitlements to purchase the properties.VA secured loans are guaranteed by the federal government. In all home loans secured by the Department of Veterans Affairs, the lender is refunded all lost money in the event of a foreclosure.
Who can buy VA foreclosures? The answer is anyone. Buyers that are qualified, even non-Veterans will also receive benefit of a VA loan. There are a number of advantages in buying VA foreclosures, including:
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No down payment required
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VA will pay closing costs
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PMI is not required
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VA funding fee can be financed
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VA loans can be assumed.
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No mortgage insurance premiums
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No mortgage prepayment penalties |
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Because discounts can range from 10- to 50% of market value, VA foreclosures can provide buyers with instant equity.
Another big advantage of buying VA-foreclosed homes is that the VA will provide financing for some of them. It’s called VA Vendee Financing and is available to both veterans and non-veterans. It is not a veteran loan The VA will not, however, make any repairs. All VA home foreclosures are sold in “As-Is” condition.
Bank of America is the service provider for VA Homes for Sale.Bank of America lists and sells VA foreclosed homes through local real estate agents. You can do free search of VA foreclosures in your state at by clicking Free Search Of VA Foreclosures.
Buying any foreclosed home can be a very complex process, therefore,I highly recommend you consult a real estate professional such as myself that has obtained their Short Sale and Foreclosure Resource (SFR) certification to help with this kind of transaction.
The process of buying a VA foreclosure is similar to that of buying any other bank foreclosure.All VA foreclosures are listed on the local Multiple Listing Service by local real estate agents. Making an offer on VA foreclosed homes is similar to making an offer on a seller-owner property. Offers for the property are made to the listing agent. A $500 earnest money deposit is required on all offers. The listing agent then submits the offer to Bank of America. Your agent can get the necessary offer forms from the Bank of America website.
If an offer is not accepted on a VA-foreclosed property for sale, VA will counter-offer just as a seller would do. The process of getting an accepted agreement can, however, be slower than the normal buyer-seller transaction.
Buying a HUD Home
What is a HUD Home?
The Federal Housing Administration (FHA) is the agency in the US Department of Housing and Urban Development (HUD) that provides federal mortgage insurance for residential homeowners. If a foreclosed home (must be 1-4 unit residential property) was purchased with a loan insured by the FHA, the lender can file a claim for the balance due on the mortgage. FHA pays the lender's claim, then transfers ownership of the property to HUD, which tries to sell the home in order to recover the loss on the foreclosure claim.
Department of Housing and Urban Development (HUD) residential foreclosures are available throughout the United States. The sales process for purchasing a HUD home isn't quite the same as you'll encounter when buying a home from an individual, so take a few notes before you go home shopping.
How much do HUD homes cost?
HUD homes are appraised, then priced at fair market value for their location. The price of a home in need of repairs is adjusted downwards to reflect the investment the new owner must make to improve the home. Yes, you can bid over and under the list price, however, if you submit a lowball offer of only 50% of the list price your bid will most likely not get accepted.
Who Can Buy A HUD Home?
Almost anyone! If you have the cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. HUD Homes are initially offered to owner-occupant purchasers (people who are buying the home as their primary residence). Following the priority period for owner occupants, unsold properties are available to all buyers, including investors.
Will HUD make the repairs?
HUD homes are sold as-is. The new owner is responsible for all repairs and improvements.
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How do I find a HUD home?
You can view HUD listings by following state links on HUD's Web site. Each state's Internet destination is set up a little differently, so take some time to browse the search engines and layout.
When you've located a home you would like to see, any HUD-approved real estate office can show you the property. They are listed on the Web site. HUD employees do not work with home buyers--you must use an agent.
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Do I simply make an offer to purchase a home?
HUD foreclosures are sold using a bidding process. There's an Offer Period, during which sealed bids are accepted from your agent. At the end of that period, all offers are opened. HUD will generally accept the highest bid, or the bid that brings them the highest net.
Following the initial "Offer Period" homes remaining unsold are offered on an "extended" basis which means offers may be submitted any business day. If a bid on one of these homes is acceptable, the broker will usually be notified within 48 hours of HUD's acceptance of the offer.You will be given a settlement date, usually 30-60 days from the date of your accepted contract.
According to available statistics, HUD will usually accept about 86% to 88% net to list price.
HUD will also reduce the list price after the HUD home for sale has been on the market for 5-6 weeks. Usually the reduction is 10% of list price.
HUD will pay real estate agencies a commission of up to 6% for the sale of the home. Be aware that to get paid, the selling agent must insert wording in the contract that verifies HUD will pay his or her commission.
Will HUD finance the home?
HUD does not provide direct financing to buyers of homes. You'll need to arrange for a conventional loan or other financing. Be sure your financing is in order before you make an offer. If your bid is accepted, and you do not close on the house, you may lose the earnest money deposit you submitted with the offer.While HUD does not provide direct financing for the purchase of a HUD Home, it may be possible for you to qualify for an FHA insured mortgage loan to finance the purchase.
Here is a very important point if you are using a FHA loan to finance the purchase of a HUD home foreclosure. If you bid over the initial list price of the HUD home property then you have to bring to closing the difference from the initial list price and your bid price.
For example, if the property is listed for $100,000 and you bid $110,000 you will have to bring an additional $10,000 to closing. The reason most people uses FHA financing is because of the low payment of 3.5%, so most people would not have the additional amount of the over bid..
 Should I have a professional home inspection?
Home inspections are recommended for any home purchase. You should inspect a HUD foreclosure before you make the offer to purchase. It will help you determine a bidding price, especially if repairs are required.
If you are interested in acquiring a HUD Home that is in need of repair, you may be interested in applying for a FHA 203(K) Rehabilitation Loan. When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property.
Important Note: to purchase a HUD owned property with a 203(k) loan, the property must be advertised that it is eligible for financing with a 203(k) loan.If the HUD-owned property is purchased with other funds, a 203(k) loan can be made after the property is in the buyers name. In this case, cash back will be allowed to the borrower for a period of six months from purchasing the HUD-owned property.
Homes build prior to 1978 may contain lead paint, so learn more lead paint hazards before making an offer. Other items to consider are asbestos content, buried storage tanks, and other environmental hazards.
Can I buy a HUD foreclosure for investment purposes?
During the initial offering, HUD homes are usually available only to those who wish to live in the home. If an owner-occupant does not bid on the home, investors are allowed to enter the bidding process.
Does HUD offer other programs?
If foreclosures are not sold within six months, HUD will sell them for $1 each to approved nonprofit organizations and government agencies. Homes must then be used create housing for families in need or to benefit neighborhoods.
HUD REO properties located in designated Revitalization Areas are available at a reduced sales price to law enforcement officers, teachers, firefighters, emergency medical technicians, nonprofits and local governments.
What is an SFR?
The complex details involved with short sales and foreclosures are unique calls for specialized expertise. Contact an agent such as myself that has earned the Short Sale and Foreclosure Resource (SFR) Certification through the National Association of Realtors and who is committed to guiding you through the process, setting realistic expectations, and streamlining your path to homeownership. Call me anytime at (910) 787-2160 to set up a free, personal consultation.
If you are considering buying a short sale or foreclosure, there could be drawbacks that I, as a real estate agent, cannot advise you on.For your protection, I suggest that all borrowers:
Obtain legal advice from a competent real estate lawyer to discuss title issues, changes to land use, sellers right to redemption and a host of other issues.
Call an accountant or CPA to discuss short sale and foreclosure tax ramifications
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