HUD Blocks Government Foreclosure Purchases
April 10, 2008
Earlier this week, HUD decided to block government foreclosure home purchases in Ohio and Michigan. In both states, local governments were going to purchase HUD properties for $1 under a special program. The communities would then restore the homes or, as is more likely in these cases, bulldoze and rebuild.
Now, HUD is reconsidering the foreclosure purchases. The Cleveland Plain Dealer reports:
“A HUD spokesman said that HUD wants to make sure the program’s requirements and intentions were followed. That could include the goal of strengthening communities as well as making sure HUD got “a maximum return” on property sales to help support the FHA insurance funds, according to the HUD memo.
Another issue apparently will be reviewed: the purported hoarding of $1 houses. Wayne County, Mich., alone has tried to buy about 1,000 $1 houses as it attempts to remove blight, according to the Chapman firm. Cities in the area, including Detroit, complained that the county was overly aggressive, saying they, too, want a chance to buy $1 houses within their borders.”
Should HUD discontinue the programs in these areas, there will be a massive amount of inventory available to investors. However, no one seems to be particularly interested in buying up foreclosure homes in areas such as Detroit. Dozens of homes in the city are already listed at less than $5,000 and there have been few takers.
See also: HUD Foreclosure Guide
Funding HUD Home Improvements - Tax Free
April 9, 2008
If you take out a personal loan or use a credit card for improvements on your investment properties, you’re missing out on a valuable tax deduction. One of the most financially savvy ways to fund such improvements is with a HELOC loan.
A home equity line of credit (HELOC) is secured by the borrower’s home and acts as a revolving credit line similar to a credit card. In addition to a low interest rate, borrowers can deduct the interest paid on HELOC money used to improve or repair their properties. Since HUD properties are sold “as-is” (and have often been used as a punching bag for tenants upset about an impending foreclosure), this tax deduction can be a huge asset.
Unfortunately, lending standards have tightened since the housing market decline and it is somewhat difficult to qualify for a HELOC now. However, those that can qualify will have access to extremely low interest rates. (The prime rate was recently slashed to 5.25% - the sixth cut in the past six months).
See Also:
$7,000 Foreclosure Tax Credit Proposed
April 8, 2008
The Senate is currently considering a bill that would offer a $7,000 tax credit to those purchasing foreclosure properties. Forbes.com reports:
“Like the House measure, the Senate bill has a standard deduction provision, but it allows businesses to apply their net losses to previous years in which they turned a profit. It gives the Federal Housing Administration (FHA) the ability to insure pricier mortgages, and it provides a $7,000 tax credit to those who buy foreclosed properties.”
If the bill goes through, purchasing a HUD foreclosure property may become even more lucrative for investors.
See Also: Congress Considering $15,000 Rebate Checks for Homebuyers
Syracuse Mayor Requests HUD Foreclosure Auction Cancellation
April 7, 2008
The spotlight is once again on Syracuse this week, as the mayor is making further requests to change HUD foreclosure auction policies. Previously, the mayor had asked HUD to postpone the sale of nine investment properties so that the city could locate qualified landlords. In an unusual move, HUD agreed and postponed the foreclosure auctions instead of selling the properties online.
Now, the mayor is asking HUD to cancel the foreclosure auctions all together. Local News 10 Now reports:
“Driscoll asked HUD secretary Roy Bernardi in a letter to cancel the April 15th auction so that the city can develop a negotiated sale of the properties. “
The mayor is also asking HUD to allow the foreclosure properties to be sold individually.
As the letter was sent this evening, there has been no immediate response from HUD. Their decision could have a huge impact on the future of HUD foreclosures, however. Should they agree, they may inadvertently give more control to cities and communities. This could result in the loss of funds by keeping properties in the market for an extended amount of time and could also result in reduced inventory for investors.
See Also: Where to Find HUD Homes for Sale
Evaluating HUD Properties
April 2, 2008
All HUD foreclosure homes are sold “as-is.” However, potential bidders are given ample opportunity to evaluate the condition of these properties. Whenever HUD lists a foreclosure home online, it also includes a property condition report in PDF. The reports tend to be extremely detailed and list problems with the property such as damaged roofs, removed appliances, and plumbing problems.
In addition to the report, buyers can walk through the properties with their agent before placing a bid. Once a bid is placed, the accepted bidder is encouraged to hire a professional inspector to look for issues such as radon gas.
To learn more about analyzing these foreclosure homes, check out our detailed article: How to Evaluate HUD Properties.
HUD’s Good Neighbor Next Door Program
April 1, 2008
In certain areas, HUD allows service professionals such as teachers to purchase foreclosure homes at a whopping 50% discount. Here’s how the HUD website describes the program:
“Buy a home through HUD’s Good Neighbor Next Door initiative designed to encourage renewal of revitalization areas by providing law enforcement officers, firefighters, emergency medical technicians and teachers an opportunity to purchase homes in these communities. HUD provides a substantial incentive in the form of a fifty percent discount off the list price of eligible properties.”
In order to qualify, buyers must agree to live in the home and not sell for a specified amount of time.