HUD Homes

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Has anyone purchased a HUD home? I've heard some great things about how you can get those homes significantly below market value. But I do have two questions:

1. How do I find the agent that will help with the purchase of a HUD home when the property is not in your own backyard?

2. What are some of the disadvantages of a HUD home?

Any feedback would be greatly appreciated. 

[Jarrod Weaver]

Being a HUD registered broker in both Texas and Florida I can tell your that good deals can be had even when it doesn't seem that way at first. Of course, as an investor, you are looking at the homes that have been passed over by potential owner occupants and go into the "extended" category. Take the time to actually view ALL of the homes that meet your personal filter.

If a good home is listed for $95K that doesn't mean that is what you have to offer HUD. Decide on a reasonable price that matches your business plan and have your agent submit that. (It takes 5 minutes - if your agent has a problem with submitting multiple offers via the HUD site find another one.) Let's say you can make it work at $65K then submit that. As long as no other buyer offers more they will send you a counter offer. This can go on for quite a while if no other higher offer comes along.

Perhaps the best one I have ever done was a 986SF  2/2 built in 2007 that needed paint and floors. The list price was $78K and we ended up closing for $46K. We put $2k in it and have rented it with 99.99% occupancy since then at $850/month.

I have also done HUD flips that netted just under 100% ROI in a very short period of time.

One other thing to consider is that HUD is looking at their own net and the agent commission has a major impact on their net. Find someone who is willing to offer a discounted rate and continue to work with them in the future. Better yet, see if some degree of partnership on the deal can be worked out. Think about using the agent's commission to fund the repairs then have them paid out as a portion of the rental income or when it gets fixed and sells at market price.

Hope this helps. Good luck.