Government Repos/Bank Foreclosures and How They Work

The Department of Housing & Urban Development (HUD) administers the FHA loan program. When someone cannot make their payments the bank will foreclose and the home goes in HUD's REO list. (Real Estate Owned is a term for foreclosed properties.) Gardner Real Estate, a subcontractor for HUD, sells these homes with a Weekly Sales Listing program through approved Real Estate Brokers only. The Veterans Administration guarantees loans for Vets and has a weekly Repo list also, with very easy to assume loans.

These properties are usually listed at below market prices, because they are sold "as-is", and are not warranted. They can go for less than the "list" price and often do. You can inspect these properties at any time. Some lists contain little in your area of interest, while others may have many homes in just the right location. To be successful with these programs you need patience and an agent with experience using "The System". A brief outline of the procedure is as follows:

· Obtain your "Lenders Commitment Letter".
· Begin looking, get familiar with inventory in the areas you want, and check the updated lists.
· When you find a good home, we write a bid and submit it for the bid opening.
· If you are the successful highest bidder, we process the loan and close in 30 to 45 days.

Bids are sealed so nobody knows who bid what. This means you have to be the highest bidder without throwing away any money. If you bid too low, you always lose, and if you bid too high you've paid more than you had to! Some homes will not receive any acceptable bids, and then a one or two week period of extended daily bidding is allowed. This is how you find some very good deals. If the home does not sell on the daily list, it will be relisted 2 to 6 weeks later, usually at a lower price.

FINANCE INFORMATION

Whether you have no down payment or 20% down, a pre-approval is a must. A Pre-Approval letter effectively means you are a "Cash Buyer", and sellers love to see this as it means your loan has actually been submitted, and approved! To purchase a HUD owned property you must show a "Letter of Commitment". This process takes about 2-3 days. The items needed to provide your Letter of Commitment are as follows

____ W-2 forms for l999 & 2000, (full 1040 tax forms if self employed)
____ Paystub's to cover a full one-month period
____ Your most current bank statements for 2 consecutive months
____ Signed application forms and credit report authorization

When your bid or offer is accepted, your good faith deposit is placed in escrow. For HUD this is $2,000, for VA it's $1,000, and with most everyone else it's negotiable. The deposit, as well as the total downpayment, can be from savings, a gift, or even borrowed funds. Cosigners can be used to help quality you for FHA or VA, even if they won't be living in the property. If necessary, your credit profile can be improved very quickly with a little work. The pre-approval will show you your maximum loan limits so you don't waste your time. It can also show you how to make small changes in your finances to quality for a larger loan and a bigger house.

Loans are also available to fix the property, buy appliances or even do major remodeling. The loan can be funded within 21 days of closing your purchase, and is a fixed rate, tax deductible loan. For a $7,000 loan the payment is about $115 mo., and for $15,000 it's about $170. These loans are a good way to take your downpayment back out of the property, and lower your monthly payments with bill consolidation.