The Departments of Veteran's Affairs (VA) and Housing and Urban Development (HUD) administer home loan guarantee programs. When these loans go into default, VA and HUD can end up with properties to sell. These properties are sold by competitive bids with the minimum bid being the "fair market value" of the property. The properties are generally sold "as-is," no warranties. HUD does not offer financing for its repos, though many are approved for FHA financing. VA formerly offered financing, but has turned over management of its properties to a company (a federal bank) which now lists all properties with a local real estate agent. HUD and VA repos may only be purchased through a licensed real estate agent, see your local real estate agent®.
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A $1,000 earnest money deposit must accompany the offer and must be certified funds (cashier's check or money order). This deposit is returned if the VA rejects the offer. 1
Bargain prices on extreme "fixer-upper" cases do exist, but, since the minimum bid is "fair market value," don't expect to steal a home.
Homes are sold "as is," no warranties. They usually require some repair and some require major rehabilitation.
The Department of Housing and Urban Development has just implemented its new program for sale of foreclosed properties from the FHA loan program. Like VA homes, you may only place a bid using a registered real estate licensee. The program is similar to the VA program, with these major differences.
No direct financing offered by HUD. (Though FHA loans and rehab loans are available for the properties. To protect your earnest money deposit, you must have a preapproval letter from a lender before you make a bid.)
For higher priced properties, the minimum deposit is $1,000. Deposit must be certified funds (cashier's check or money order).
HUD will accept less than full price on properties listed with a fair market value below $10,000. From the bid statistics on past sales, it appears that in some cases they are accepting bids as much as 10% below asking price on more expensive properties as well.
1 -- By law, I must present your offer even if you refuse to make a deposit, but both VA & HUD have a policy of automatically rejecting any bid without this deposit without exception, which any seller is entitled to do. My 'presentation' of an offer with no earnest money will consist of a telephone call to the appropriate party. Their regulations are that if I submit a bid electronically without the required deposit, I will lose my registration and they may also report it as a fraud. Your depositless 'offer' will be presented by a phone call to which we should not even expect the courtesy of a return phone call in my experience.
