The federal government owns many multi family homes currently in pre-foreclosure. Buying them has its advantages and disadvantages
Multi family homes are excellent real estate investment tools. Buying multi family homes in pre-foreclosure from the federal government is a little different than buying traditional foreclosures because the lender has not yet foreclosed on the property.
The government owns most of its multi family properties through the Department of Housing & Urban Development (HUD), which is part of the Federal Housing Authority (FHA). HUD also manages some properties seized through the Internal Revenue Service (IRS) and some taken over by the Federal Deposit Insurance Corp. (FDIC) and through the Veterans Administration (VA).
During the pre-foreclosure stage, the owner of the property learns that the government intends to foreclose. The pre-foreclosure stage can also include the time between when the government takes over ownership of a property but before it advertises its intentions to sell the property at auction.
Federal pre-foreclosure multi family property buying comes with the benefit of getting you a better deal. The government wants to sell the building quickly, and you can often negotiate for a lower price than the property is actually worth. The government might also do a basic inspection on the property and do some routine maintenance before it goes up for sale, cutting down on the cost that you pay later.
Despite the prospect for good bargains, there are a number of challenges to buying multi family homes in pre-foreclosure from the federal government. For one, the government has a final say over the sale price of the property, and you may not always know what the government needs to get out of a particular property in terms of price.
When you buy HUD pre-foreclosure multi family homes, you must also nearly always deal with existing tenants living in the building. The government requires that you give any tenants advance notice of when they must vacate the property. It might take up to six months before those people leave the property and you may not always want to maintain the same tenant core once you take ownership of the property.
While most foreclosed government properties are sold at auction, the benefit of pursuing a multi family home in pre-foreclosure is that you have some time to line up financing. In the case of certain HUD properties, the agency has programs in place to assist you in your purchase, especially if the property is fulfilling the needs of a community’s affordable housing population.
Buying multi family homes in pre-foreclosure from the federal government may be your best opportunity to get involved in real estate investing while also finding an affordable place to live. Getting through the process may be easier if you have the support of an experienced advisor, RealtyNow can help by putting you in touch with local real estate professionals who have that experience.