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  Category: Articles » Finance » Real Estate » Article

So what is the best option: HUD homes or bank owned properties?

By Ken Wilson

Buying foreclosures still is a smart investment. You just have to be on a lookout for the best deal. You can choose the one that best suits your preferences from a wide offer including HUD homes, VA houses, foreclosure homes, distressed properties, bank owned properties and other real estate foreclosures.

Many people don't know what to do when they have to choose between placing their money in HUD homes or in bank owned properties. HUD homes fall under the bigger category of government foreclosure homes, thus being government property, while in case of bank owned properties the title is self-explanatory and easier to understand.

Bank owned properties, also known as bank foreclosures, are real estate properties owned by a bank following a property foreclosing process. The foreclosure proceedings get started the moment when the owner has financial problems and is in default with mortgage payments. After taking ownership of the property, the bank would have all the arrangements done for an action in order to sell the property and recoup its losses. When considering buying bank owned properties, you should also know that there are three ways of achieving them: as pre-foreclosures, at the auction or as REOs (real estate owned) properties.

Purchasing bank owned properties is the most popular way to buy foreclosures, because it involves less complications and risks. Locating bank owned properties is easy. Look in the newspapers classifieds, call the banks or read the public notices at the county courthouse. These methods are all time-consuming though. The easiest way is to use a good online listing service, such as Search through their extensive listings for the properties that meeting your investing criteria, price range, size and style. As an investor, you can buy bank owned properties at a 15-20% discount and earn 35-40% in return, thus making a tidy profit. As a home buyer, you are more keen on buying below marketed value with a low down payment, low interest rates and reduced closing costs. All these items can be negotiated with the bank as the lender. Most people are thrilled by the fact that there are no liens or judgments to contend with, no homeowners or tenants to evict, and no back taxes due. Moreover, accessing bank owned properties for evaluation and inspections is quite easy.

The bank is also involved when buying HUD homes. The American government, through HUD Department, encourages mortgage lending by guaranteeing mortgage payments on homes that meet certain standards. In case of owner's default on this mortgage, HUD pays the balance on the loan and the ownership is transferred to HUD, thus becoming a HUD home or property. Then, the asset is sold at HUD homes public foreclosure auctions at a price lower than the market price. In case of HUD homes, the government does not provide financing support, so the buyer has to find alternative financing solutions through banks or other real estate financing organizations. Some of the advantages associated to buying HUD homes refer to low down payments and more flexible credit requirements. The buyers of HUD homes can ask HUD to forfeit some of the real estate commissions, financing and closing costs. Since most HUD foreclosures can be of low to moderate value, substantial repair works might be needed and HUD will lend the money to fix the property through a special program.
About the Author
If bank owned properties are perfect for first time buyers, as well as for experienced investors, HUD homes seem to be dedicated to people from certain professions teachers, law enforcement personnel, firefighters and EMTs, who have the opportunity to purchase a property for 50% of the market value and with only $100 dawn payment.

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