HUD-owned properties can be a good deal but buyers need to be aware of a few differences if they plan on purchasing a HUD Home in Colorado Springs.
1. Online Auction – All offers are submitted online and investors cannot place a bid on a HUD property until it has been on the market for 31 days. Purchasers participating in the Good Neighbor Program are given priority above all other buyers for the first 5 days that the HUD Home is on the market. Once a bid is submitted on your behalf by your Colorado Springs Real Estate Agent, you will find out whether or not your bid was accepted 24 hours after the bid deadline. HUD may allow bids to accumulate the first 10 days a property is on the market before picking the highest bidder.
2. Original Documents – Once your bid is accepted, HUD will require the contract package be submitted within two days and all documents must have original signatures. The HUD purchase contract is different from the typical Contract to Buy Real Estate that is used when offering on other homes for sale in Colorado Springs.
3. Earnest Money and Inspection – Owner occupants have 15 days to perform a home inspection if they do back out of the contract due to an inspection issue, their earnest money may not be refunded. HUD has a specific list of inspection items (e.g. bad roof, radon, structural issues) that would warrant the refund of a buyer’s earnest money and a cosmetic issue is not one of them. Investor buyers risk losing their earnest money regardless of the inspection.
4. Repairs – Escrow for repairs can be added to the loan if it does not exceed $5,000 and repairs cannot be made prior to closing. If the repairs exceed $5,000, buyers would have to discuss the possibility of an FHA 203k loan with their loan officer. Buyers have 60 days to close since FHA 203k loans take longer to complete.
5. Appraisal – If the buyer utilizes FHA financing, a second appraisal is not required since HUD obtains appraisals on all HUD-Acquired properties beforehand. FHA buyers that overbid on a HUD-owned property would exceed the appraised value and could not finance the overage; instead, they would be required to bring the difference to closing.
Contact me about buying a home in Colorado Springs at 719-660-9058