From: asylvain@felix.filenet.com (The Chipmunk)
Newsgroups: misc.invest.real-estate
Subject: Re: HUD homes (types)
Date: 20 Jul 92 20:21:53 GMT
Reply-To: asylvain@fritz.filenet.com (The Chipmunk)
Distribution: usa
Organization: Foundation for the Increased Wealth of Chipmunks

Written in article <1992Jul16.171906.15917@tellab5.tellabs.com>
 by jstein@tellab1.tellabs.com (Jeff Steinhauer):

: I was wondering about HUD and the type of homes the posses.
: My impression of HUD is that the homes are in depressed areas and
: are a breeze away from being condemed.

Nope.

Actually, you are addressing two questions.

1) What types of houses.

Residential.  Anything up to, and a little beyond, the FHA limits on a
first trust deed (mortgage).  Ie, you won't find any $500k houses on the
HUD list, simply because the FHA has never lent that much $$.  Beyond
that limitation, you'll find all kinds of houses in all kinds of areas.

2) What condition are the houses in.

Anything from absolutely immaculate to a smoking hole in the ground where 
the house used to be.  I've seen houses that you could move in tomorrow 
with no more work than some clean-up and changing the name on the water 
meter, and I've seen houses that your best bet would be bulldoze and 
start over.

The only thing to be CAREFUL of, is that there is a fundamental reason
the house is foreclosed to begin with.

Take a hypothetical: you just lost your job, and you can't find another.
My goonness, whatcha gonna do?  Well, eventually you may be forced to
leave your house.  What will be the first thing you'll attempt?  Why,
you'll sell the place, naturally!  But what if you CAN'T sell, for what-
ever reason?  Well, sooner or later the lender will get sick of you not
paying your mortgage, and will begin the foreclosure proceedings.

So, what are some reasons why a house can't sell or rent?
a) It's in horrible condition.  
b) It's in a horrible neighborhood.
c) It's against code (they converted the garage or some such) and it
   costs too much to rectify.
d) It has some other nasty problem that can't be rectified cheaply.
e) Any others?  I'm sure someone can add to this list.

Your main job in buying any foreclosed house, not just HUD, is to make 
your best determination as to WHY it wouldn't sell, and apply that to 
your own situation.  For example:

Horrible Condition.
a) Buyers and Sellers do not always look at a property with their heads.
They're using their hearts and their emotions, and for an investment as
large as a house, that's plain stupid.  But, if you look at it a little
more wisely, you can get a bargain.  As an investor, you have to be
"smarter than the average bear."

Sometimes "horrible condition" means you slap on a coat of paint, put
new veneering on the kitchen cabinet, replace the bathroom fixtures, and
viola! ready to move in.  Sometimes "horrible condition" is exactly
that.

Horrible Neighborhood.
b) There's not much you can do with lousy neighborhoods.  Steer clear,
unless you just want a rental, and don't care about the crack house down
the street.  (Hey, your renters may like that kind of convenience!)  In
general tho, even for rentals, steer clear.  Lousy neighborhoods will
only attract lousy renters, and there's no point in digging your own
grave.

Code Violations.
c) Code violations can only be handled on a case-by-case, of course.  A
garage conversion can sometimes be converted back easily.  A room add-on
may or may not be easily upgraded to code.  But part of the reason the
sellers couldn't sell may have been that they can't get back both the 1st
mortgage, AND the 2nd mortgage taken out in order to make the illegal
add-on.

They may have been trying to sell a 2-bd + add-on for a 3-bd price, but
if the add-on ain't legal, they just can't DO that.  So, they're stuck,
and get foreclosed.  As the new buyer, you may care didly about the
add-on, and just tear it down.

Unrectifiable Nasty.
d) Of course, a nasty problem that can't be rectified is another case-
by-case.  Sometimes, it's all in how you look at it.  I've heard of a
case where the roof was separating from the wall, and there was simply
no cheap way to fix that.  Well, it turns out it kept the rain out, so
the buyer just re-sold it "as-is" with proper divulging.

But, if the foundation is sliding down the hillside, you probably want
to steer clear, unless your brother-in-law is a contractor who'll spe-
cializes in that kind of work, and will work for next-to-nothing.

If the price is right, bulldoze it and start over.

: Please, can anyone shed some light on the subject or has anyone had
: any luck through HUD that they can share?

You want the long story or the short story?

Short story: We invested in a house in Carson, CA, in a not-too-great a
neighborhood.  It was a "duplex" style house, meaning it shared a wall
with one neighbor house (a point against it all by its lonesome).  What
we didn't realize until it was too late, was that probably one contri-
buting factor to why the original sellers couldn't sell, was that our
shared-wall neighbor happened to be running a crack house.

Well, it took us a year to sell, and in that space of time, the crack-
house half foreclosed.  I would have bought that half also, and tried to 
rent the whole thing, except my wife was ready to bail out by this time.
(Who can blame her?)

Probably the direst consquence we learned, outside of being careful what
house to buy, was to NOT TRUST THE REALTOR.  Ie, just because the broker
has brains enough to take your bid to the HUD office, does NOT mean they
have brains enough to actually SELL the place.  When we finally gave up
and sold the place ourselves, we sold it 2 weeks.

There's a long story here too, but I don't think you want to hear it!

-- 
The Chipmunk.
Opinions are mine, batteries not included, void where prohibited.
What this country needs is a good five-cent nickel.
Newsgroups: misc.invest.real-estate