The United States government is aware of the rising number of foreclosures in these troubling economic times. Bailout plans have been put in place and it has been said that between 8 and 9 million inhabitants have the possibility of qualifying for help to avoid the foreclosure of their home. However, what it comes down to is the question of whether these government bailout plans are working or not. This question will be explored here. There have been many complaints in regards to lack of specific enough information for homeowners to be able to make use of the government bailout plans. They seek assistance from their lenders, but they have no details to give. Others claim a complete lack of help is available at all. Settling on the reasons for the supposed failure of the government bailout plans is difficult to accomplish as people are not willing to have their mistakes publicized or even admit they have asked for support and therefore, have been declined assistance.
There are no statistics to accompany the amount of people who have applied for assistance versus who have been rejected or whether any loans were renegotiated. This lack of book keeping and accountability has been one of the foremost complaints of homeowner advocates. Obviously, the concern here is that the law behind these government bailout plans needs to be improved if the number of people who can find assistance with said programs are to be successful. One of the main sections of government mortgage bailout plans is for the assistance of home owners who are stuck living in a home that will sell for less than the principal balance of the mortgage they still owe on it. This is equivalent to owning a totaled car, except there is no way out of being under water in your home ownership without losing a huge amount of money. Borrowers in this predicament have been turning more and more often to strategic default, simply walking away from their homes even if they can afford the payments.

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Government foreclosures are sold by the government. There are many reasons why the government will occasionally seize a private property or a piece of commercial real estate. Sometimes, this occurs because a property owner has not paid the property taxes which are owed to the government on the property. The government can then repossess the property and resell it in order to make up the lost revenue. In some cases, if a property owner commits a crime on a property – such as drug manufacturing or drug sales, for example – the government can seize the property as part of the proceeds of an illegal business. Since the government is eager to recoup the money, government foreclosed are often sold at below market value.

There are many types of government homes available for sale. Tax sale homes, for example, are one of the more sought-after government foreclosure types. Tax houses are sold off because the previous homeowner did not pay property taxes on their home. Tax sale homes only need to be sold for the amount of taxes owing, and in many cases this amount is only a fraction of the actual value of the home. It is possible to find amazing deals on government homes at tax sales. Most tax sales are held between April and June.

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These days HUD foreclosures are everywhere. While this is bad news for the economy, this can be great news for you, because HUD homes represent some of the best deals on the market, in many cases at “pennies on the dollar” prices.

It is easy to get excited when you are looking at the low prices of HUD listings, but you need to be aware of some pitfalls you may face. One of the details you need to pay close attention to when purchasing a HUD home either as a primary residence or investment property is the FHA Insurability. HUD homes are clearly labeled as Insurable, Insurable with Repair Escrow, or Uninsurable, and this will determine what type of loan you must use to get them.

Homes labeled “insurable” indicate that nothing major is wrong with the property, and the home is more or less move-in ready. No muss, no fuss. These are the first HUD homes every other buyer wants to look at, and the first homes most HUD-approved real estate agents want to sell you.

Note: while these “insurable” homes are good deals, you may face stiff competition from other homebuyers and novice investors. If you need to use financing, FHA guidelines will not allow you to borrow more than the HUD asking price. This means you will have to come up with cash out of pocket if you want to beat a competitor offering more than the asking price. So much for your small down payment! However, if you don’t make any offers, you will lose 100% of the bids, so go ahead and throw in your hat for the right properties.

Homes with less than $5,000 in required repairs are classified as “insurable with repair escrow”. Other buyers are not as eager to bid on properties in need of work, which means less competition and deeper discounts for you. Also, many people are unaware that the traditional FHA 203(b) Loan Program will allow you to finance these repairs into your loan, instead of paying them out of pocket, via a 203(b) Repair Escrow. At settlement your lender will place the repair money in a set-aside account for you to make the necessary improvements after the loan funds.

Note: while this seems straightforward, you must make sure that your lender will allow repair escrows before you begin the loan process. Only a handful of lenders participate in the repair escrow sub-program due to additional risk and administrative burden. Find this out before you place your bid, or you could find yourself without a loan, without a home, and without your earnest money deposit.

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