If you have seen a HUD home that you’re anxious to buy, it’s easy to get caught up in the excitement of placing a bid on the home.  Bids are submitted online on HUD’s website, www.HUDhomestore.com, so even the listing agent often has no clue regarding who is bidding on the home and at what price.  Problems may occur, however, if you bid over the appraised value* of the home and are obtaining an FHA loan.  For example, if HUD has a property appraised at $115,000 and you place a bid at $120,000, you’d have to pay that $5,000 difference at closing, plus the down payment required for the loan and any closing fees that are not being covered by the seller. So, before you decide to submit an offer on a HUD home, have your lender provide you with an estimated closing costs worksheet.  That way, you’ll know how much you can comfortably afford to bid on a home, instead of getting a shocking figure at closing and, possibly, being unable to close on your dream home. 

  

*For some lenders, if the appraisal report is older than 4 months, a new appraisal report would be required, which may justify a higher bid amount.  As always, consult with your lender before submitting an offer to discuss your options.