Wednesday, January 14, 2015

After you win the bid - Buying a foreclosure

Congratulations! You won the bid. Now panic. There are a lot of rules and regulations and all the paperwork must be completed in a timely fashion and completely correctly. This is truly where having a knowledgable real estate agent is going to help you. Find someone who has been through the process more than once or, if you have an agent that you really love, make sure they have someone in their office who can walk them through the process.

After winning the bid you will be required to fill out the purchase contract in full and have it sent back within 48 hours. HUD will then review the contract to ensure you haven't made any mistakes. Make sure that you sign the forms with your full legal name including your middle initial each time you sign. That and remembering the actual date was much more difficult for me than it should have been. In my defense, I have an extra last name that I never use and haven't signed anything other than a receipt in a long time. They get to take as long as they want. This is the hurry up and wait thing I was talking about.

I'm still a little unsure about the accuracy of some of the information I've gotten through our realtor so please make sure that you check with a professional but this is what I've been told. The contract says that you have 45 days from the initial acceptance of your bid but we have been told that we have 45 days from the day we received the signed contract back from them to close on the purchase. Our goal is to close as soon as possible but I'm a little concerned that this question of the date is going to come back to bite us. You are given 15 of those days to do a home inspection and if something comes up on the inspection that you cannot live with you can get your earnest money returned as long as you back out within that 15 days. If you wait too long you will lose your earnest money.

The inspection process for a HUD home is a little more challenging than it is for buying a normal home. HUD homes always have the utilities turned off and they are winterized from October to May. You absolutely must get authorization from them to have the utilities turned on before you schedule the utilities. Then you may schedule the utilities and your inspection. This means you are paying deposits and fees for all utility companies plus the amount you pay for your inspection. Some buyers will choose not to get an inspection but as an owner occupant, I want to know what I'm getting into and am not yet confident enough in my abilities as a do-it-yourselfer to forego a professional inspection. You are buying this home AS IS so don't get in over your head.

We had a small snafu which turned out okay but led to a lot of frustration on my part. We were told by our agent to go ahead and schedule everything. Then we were told at 10 o'clock that night to cancel everything that had been set up for the next day because we didn't have authorization. When I read the authorization form I learned that we could have lost our earnest money by jumping the gun. It was annoying but not the biggest thing in the world. So one day I called and set everything up, the next day I cancelled and we got the authorization, the next day I set everything up again, and today we finally had our inspection.

Thankfully, there were no big things that came up in the inspection that were enough to scare us away. There are so many little things that I can't even remember them all but most of it was stuff we had already seen and we shouldn't need to call in professionals for most of it. I'm so excited to share pictures and plans with you but I don't want to share any photos until we've closed. Stick with me through the rest of the process. We will be contacting our lender tomorrow to get the appraisal scheduled and hopefully they'll help us get closed quickly. We didn't want to pay for the appraisal until we knew for sure that there was nothing on the inspection report that would prevent us from completing the purchase. Ultimately $450 is a drop in the bucket but it's still a lot to shell out if you don't need to.

Okay, next time I'm going to do a quick run through of the inspection and problems we found. Then there shall be a gigantic list of things we want to do with the house. There are so many decor choices that we just don't agree with and I will be so happy when they all get the heave-ho.

Monday, January 12, 2015

Bidding on a HUD owned property

Last month we placed a bid on a HUD owned property. I did a LOT of googling and reading to try to make myself as familiar as possible with the process and ultimately, I wish I had trusted my own knowledge a little more along the way. I cannot repeat this enough, BE AN EDUCATED HOME BUYER! Do your homework and make this a priority for however long the process takes. It is obviously important to work with knowledgeable professionals and people you trust but the only person you can really count on to be working 100% for you is you.

The HUD listing process, at least where I live, has a few parts to it. The first bidding cycle is open to Owner Occupant buyers. This must be someone who intends to buy the home and live in it as their primary residence for at least two years. After you close on the purchase you must move in within 6 months. You can only purchase a HUD home as an owner occupant once every two years. If there are no bids accepted during the owner occupant cycle, they open the bidding up to anyone who wants to purchase the home. This is where flippers and those who want to buy rental properties will come in. An owner occupant is usually going to end up spending more on the home than someone buying it during the second cycle would.

When we were looking at the Manor (I've decided my home needs a fancy name but can't come up with anything more clever so for now, The Manor it is) it was obviously in the owner occupant stage. The home was listed and managed by a somewhat local company and they had placed it on the MLS so it showed up on all the house listing sites and apps that we follow. M and I both looked at it several times and talked about it and how it might work for us. We were excited about it and the price was amazing for what we saw in the listing photos. We had already lost one property that we thought was going to be our new home so we had been in the mind set that we weren't even going to look at anything until we had an accepted offer on our current house. The Manor made all those plans go flying out the window. We made an appointment to see the house with our realtor and, as I've already said, that showing ended up being in the dark and pouring rain. But we were smitten even in the dark.

HUD listings have a certain time period in which you must place your bids and you normally will not ever know if anyone else has placed a bid or what price they have bid. The home has a listing price to give you an idea of what the house is worth but you can bid anything you want. If you think nobody else is going to bid on it, you can bid a total lowball offer and hope that you are the only bidder. We knew that this house was listed much lower than what it sold for the last time and that it was worth more so we decided to bid above the asking price. We were pretty sure there were going to be other bids and we didn't want to lose but we also didn't want to bid too much. But, never knowing what anyone else bids makes it just a pure guessing game. Our agent suggested we bid an odd number because she knew a woman who often won bids by a dollar or two.

You must use an agent who has a registered number with HUD to place your bid and they enter it online. Once the bidding period closes you will usually have a response within 2 business days as to if your bid was accepted. We heard back the very next morning that our bid had been accepted! We were so excited but then the realization that we are very soon going to be the owners of two houses (again) set in and we got a little apprehensive. HUD properties are sold as is and will not accept any contingencies. So we knew going in that this was a risk.  But nothing risked means nothing gained!

I told you that you normally don't know if there are any other bidders or what they bid but we found out through the grapevine that there was at least one other bidder on our house. We learned that bidder #2 had placed a lower bid and then last minute they called and raised their bid. Unfortunately for bidder #2, the amount they raised their bid to was just $73 dollars less than the bid that we had placed and we won.

I hope that this is a somewhat helpful walk through the HUD buying process. I would love to answer any specific questions you might have about bidding. Next time I'll talk about what happens after you win the bid. This whole thing is very 'hurry up and wait' and can be frustrating. Even more so when your agent, however much you like them, is not familiar with the process.

Tuesday, January 6, 2015

Still on the market

We listed our house for sale 7 months ago. We had several showings in a row, then nothing for a few months, then several in the few days before our listing was set to expire, and then nothing again. I've taken new photos of some of the rooms because my real estate agent is not a great photographer and once we get them online we plan to lower our price and hopefully get some new eyes on the photos.

We were under contract for a home across town that we loved and I had big plans for the renovations I was going to do but our contract was contingent on our home selling and expired while we sat with no interest. At the time it felt like we were going to lose the perfect house and I'm still sad to lose some of the things it offered but that house, which we called The Pink House, is still on the market but our feelings towards it have cooled. Mostly the husband was concerned about the fact that the house had had structural piering done about 12 years ago. The owners had only done the absolute minimum amount of piers when there were many more recommended. We would have had the home inspected by a structural engineer before completing the purchase but even that is no guarantee that there wouldn't be further shifting in a year or five. So we moved on.

Last month we saw a listing for a HUD owned property and couldn't believe how nice it looked. My husband was more excited about the pictures of this house than any property we had looked at or driven past or talked about in all of our house hunting throughout the years. We went to look at it with our realtor on a rainy evening with a camping lantern and a garage light because there was no electricity in the house and it was pitch dark out. We couldn't reschedule because time was running out on the listing and we needed to get our butts in gear to even think about making a bid.

In short, we both loved this house. It was move in ready enough for M to not be afraid of it and has enough needs for me to feel like I can make it our home. If you've never gone through the HUD home buying process it all feels very 'hurry up and wait' and there are so many hoops to jump through that I'm exhausted just thinking about it. We did put in a bid on this house and I'll tell you more about the process but I want to take it one step at a time. Next time I'll explain the bidding process and how it went for us.

Have you ever purchased a HUD or REO property? Would you do it again? What was the hardest part of the process in your experience?