A friend of mine is one of those people who—unlike me—thoroughly enjoys going to thrift stores, pawn shops, garage sales and flea markets. For him, it’s the thrill of the hunt, the feeling of never knowing what you’ll find and the dream of finding that perfect little gem in the midst of what a lot of us consider to be junk. And I have to admit, he’s found a few pretty amazing finds. First edition books, collectable toys and some tools that I wouldn’t mind adding to my own shop.
HUD Foreclosures are Plentiful
But even though I see (and yes even sometimes envy) those cool items, I’m unwilling to invest the time it takes to comb through all of the racks, piles and stacks in order to find them.
Right now, perhaps more than at any other time in our country’s history, there are a plethora of homes on the market and many of them are HUD foreclosures. I’m frequently asked the pros and cons of HUD foreclosures, and so wanted to share my thoughts on the matter.
As with trying to find the unique or valuable item at a garage sale, you often times are going to have to look at many HUD foreclosed properties before you find the right one. These homes are sold in as-is condition and, unfortunately, they have suffered at the hands of their former tenants. Holes in walls, damaged flooring and abused appliances aren’t uncommon. In the most extreme cases, former owners will rip fixtures from the rooms or even break into the walls and damage or take pipes. This may also occur after owners move out if the property hasn’t been properly secured; vandals do watch these properties and will break into them to take anything that has value.
Foreclosures Can Go Stale
Another thing you have to be aware of with foreclosed properties is that the longer they sit, the more problems they’re likely to have. Companies who work with the lender to secure properties generally blow out the lines, cover the windows and try to make the home safe. But problems caused by pests, time and weather are often overlooked in the long term. If there is a leak in the roof or around a window, a home that is left vacant—particularly in warmer climates—can be overrun with mold quickly both inside and outside of the walls. Certainly, you’ll want to work with a good inspector who will alert you to any possible problems.
And finally, keep in mind that HUD foreclosures are not necessarily always a “screaming deal”. These houses are evaluated by FHA appraisers and priced based on fair market values. They have already taken into account any damages or other negatives which would negatively impact the price. As such, don’t expect to get a $150,000 for $40,000.
HUD Foreclosures Are Available in Almost Every City
But just as there are downsides of buying HUD foreclosures, there are also some upsides. HUD foreclosures are now found in neighborhoods across the country, so if you have been hoping to purchase a home in a specific area, a HUD foreclosure may be found there and at a pretty decent price. Not every homeowner abuses his or her property; some simply move out and move on, leaving the home virtually move-in condition. And even if it has sustained damage or needs repairs, there are programs available, such as HUD ‘s 203(k) loan program, that may help you obtain the funding needed to repair and rehab the property.
So just like there are pros and cons of thrifting, there are also pros and cons of HUD foreclosures. You just have to be willing to invest the time needed to find the right one.