A quick guide to understanding the most common types of foreclosed homes for sale:
HUD: HUD homes are homes that have been foreclosed on and now belong to the U.S. Department of Housing and Urban Development – these are generally homes that were once financed via FHA, VA and USDA loan products . These homes are listed on the local MLS systems as well as www.hudhomestore.com. HUD offers special financing programs such as a 203B loan on selected properties. Time limits for bidding by investors and owner occupants usually apply. Bidding happens online by registered bidders – mainly real estate professionals, along with some non-profits and government organizations. HUD can be very restrictive regarding repairs, closing cost assistance and other contractual terms. HUD homes tend to be in rougher condition than HomePath and HomeSteps homes.
HomePath: When loans backed by Fannie Mae foreclose – they become Homepath properties. Homepath also offers some special financing products on selected properties. Fannie Mae is more likely to make improvements to some of their foreclosed properties to make them more marketable. Time limits for bidding by investors and owner occupants usually also apply and once again – bidding happens online by real estate professionals. Properties are listed in the MLS as well as www.Homepath.com.
HomeSteps: Homesteps is similar to HomePath but applies to homes now owned by Freddie Mac. HomeSteps also offers some special financing products and is more likely to have made improvements to some of their foreclosed properties to make them more marketable. Time limits for bidding by investors and owner occupants usually also apply and once again – bidding happens online by real estate professionals. Properties are listed in the MLS as well as www.Homesteps.com.
Hubzu, Auction.com : Hubzu and Auction.com are online auction style market places where properties are marketed. Short sales and traditional sales are listed here along with bank owned properties. Your Realtor must register to submit bids on your behalf. Foreclosed homes on these sites are sold strictly as-is, the properties may be occupied, fees may apply to the buyer and no inspection periods are allowed past acceptance making these one of the riskiest purchases. Auction homes tend to be in the worst condition and are generally only good choices for experienced investors. These homes can be found in the MLS as well as on hubzu.com or auction.com
Direct Bank Owned: Some banks do not have any special REO sale programs and simply sell their properties. Since many different lenders sell their own foreclosed properties, contracts, terms and addendums all vary by lender. The process of buying a foreclosure is generally fraught with endless paperwork, complex contractual terms and lots of additional legwork. Your best resource to a successful purchase of a foreclosure is a Buyer’s Agent with significant experience with the purchase of these types of homes.
Last Updated on January 10, 2023 by Minna Reid