Look for Deals on HUD or Fannie Mae Homes

For some people, the term "foreclosure sale" summons up images of battered tenements, while others may see big profits and unbelievable prices. But these myths obscure the real story about foreclosure sales. Contrary to popular opinion, foreclosed-on properties are not all alike. And they are definitely worth exploring with the guidance of your real estate agent. The Department of Housing and Urban Development (HUD) and Fannie Mae, the major secondary mortgage company, are two major sources of foreclosure sales.

When someone with a HUD-insured mortgage can't meet the payments, the lender forecloses on the home and HUD pays off the loan. HUD then takes ownership of the home and tries to sell it at market value as quickly as possible. What types of homes are sold and for how much? HUD homes vary in price and location but most are affordable for people with low to moderate incomes. In fact, HUD offers special buying incentives that can really sweeten the deal, such as allowances for upgrading the property, moving expenses, and bonuses for closing the sale early. In addition, if you qualify, you can ask HUD to pay all or part of the financing and closing costs.

Remember that although these homes sometimes need repairs, HUD sells them "as-is," without warranty. Make sure you get a professional, independent home inspection prior to purchase. Don't expect HUD to repair any problems as a condition of the sale, either. But that's not necessarily a bad thing. HUD's asking price will probably be adjusted to reflect the cost of necessary improvements or repairs.

Start by talking to an experienced real estate agent. Your real estate agent must submit your bid for you. Normally, HUD Homes are sold in an "Offer Period." At the end of the Offer Period, all offers are opened and, basically, the highest bid is accepted. HUD usually pays the selling agent's commissions, up to 6% maximum. Most HUD homes are initially offered on a priority basis to owner occupant purchasers (people who are buying the home as their primary residence). Following the priority period, unsold properties are then available to all buyers, including investors. For more information go to HUD's web site at http://www.hud.org

Fannie Mae offers a wide selection of homes, including single-family homes, condominiums, and town houses, located in a variety of neighborhoods. Many of these homes are relatively new while older homes are offered in some areas. Some may require repairs. Again, it's smart to obtain a home inspection to make sure you know the real condition of the property.

Like HUD foreclosure sales, you can find out about Fannie Mae-owned homes through local real estate brokers. All Fannie Mae-owned homes are listed in the local Multiple Listing System (MLS). First, you present your offer to the listing broker who will present it to Fannie Mae for consideration. Through the listing broker, Fannie Mae will do one of three things in response to your offer: accept your offer; reject your offer; or make a "counter offer." A counter indicates the start of negotiations that may or may not result in a sale. If a sales price is agreed upon, you will sign a "purchase and sales agreement" and begin the process of obtaining mortgage financing to purchase the home.

You can search Fannie Mae-owned properties for sale on the Fannie Mae web site at www.homepath.com