Of the roughly 8,800 HUD homes sold
nationally in 1996, HUD's own internal documents show that 2/3 were unloaded for
MORE THAN APPRAISED VALUE! And about 1/2 of those had prices exceeding their
value by more than 10% (that would be $10,000 on a $100,000 home).
Some markets are worse than others. In Phoenix, many HUD homes have been sold
for 25% over appraised value and some as high as 50%! Other hot markets with
inflated HUD prices include San Diego, Sacramento, Ft. Worth, Atlanta, and Coral
Gables.
This ripping-off of the public (primarily uninformed first-time homebuyers)
was done with full knowledge of HUD brass and local real estate agents. In fact,
HUD encouraged this by offering full price mortgage insurance, even if the loan
amount exceeded appraised value. This policy is what stimulated these inflated
markets to get out of control.
Late in 1998, HUD finally changed it's policy... it will no longer insure
loans for more than appraised value.
Of course, all of you bright and informed investors would never pay more than
70% of appraised value, right? In the hot markets, I'm sure 99% of the HUD homes
never make it to the general list available to investors.
Bottom Line: Don't assume HUD homes are a bargain!
