The property is owned by a bank (Bank of America, Wells Fargo, Chase, Fannie Mae, Freddie Mac, etc). The banks usually pay up to 3% of sales price to cover closing costs, and will usually turn on utilities (not gas) for inspections. Some banks may provide home warranties, and some properties have been re-painted, re-carpetted, and stove/ranges added (to make FHA financing - by far the most popular buyer qualification - easier). Banks are NOT required to do these things, however, and most DO NOT. The properties are usually sold in AS-IS condition - which is why having any such property inspected is important. It's EASY to find homes that are in VERY good condition, however, with minor issues. This is where the best value is to be found.
Bank responses usually take about a week - sometimes faster. Properties owned by either B of A or Wells Fargo often require the buyer to be "qualified" (have an LSR from) by a loan officer within their organization, regardless of which loan officer will actually be used. I can get that done, if necessary.
The property is owned by the U.S. Department of Housing and Urban Development - a branch of the U.S. Government. A "HUD" home is a property whose previous owner had an FHA loan, which defaulted - and the government took the property back. The government offers up to 3% of sales price to cover closing costs, similar to the banks. A basic inspection and appraisal are already done (saving the buyer several hundred dollars). If a buyer is using an FHA loan, then the list price IS the "appraised value" of the property - and HUD provides the appraisal report freely to the successful bid winner.
Unlike most bank-owned deals, HUD does NOT pay to have utilities turned on for inspections. The buyer would need to do this him/herself (after getting permission from HUD to do so in writing - through their agent). In the event that the property needs repairs, HUD may have an option to add the necessary repair amounts onto the top of the loan in the form of a "repair escrow" - provided that the equity is there (agreed-upon sales price price + amount of repairs needs to be BELOW the list price). Like bank-owned above, HUD does NOT, however, do repairs themselves per se (property is sold in AS-IS condition).
Offers on HUD homes must be made by a HUD-registered broker/agent, such as myself, in the form of bids. Answers can (sometimes) come as quickly as the next day. There are some great HUD deals out there, and many are under $100,000 (as with bank-owned deals).
HUD homes may be a great option for buyers who are a bit short on funds. Since HUD properties already have a "basic" home inspection done (otherwise about $300), termite checks already done ($50-$500+ saved), and the appraisal (list price) is already done (saves about $400), a buyer could potentially save over $1,000 by purchasing a HUD foreclosure rather than another type of "deal".
The down side is that there will usually be FAR LESS in the way of buying options if the buyer considers only HUD homes. Typically, there will be far more bank-owned and/or privately-owned properties matching a given set of search specs (city, max price, minimum square footage, year built, etc) than there will be HUD properites with the same specs.
When I work with buyers, I normally include HUD foreclosures as well as bank and privately-owned properties in the search - unless the buyers tell me not to. If the buyers ultimately select a HUD owned property as their desired home, so much the better for them!
This is a property in "pre-foreclosure" status. The seller is attempting to sell the property for less than he/she owes on it (for whatever it's worth at this time). The current lien holder(s) need to approve this, however, since they are the ones taking the loss. This approval process can take MONTHS, and buyers making offers must be willing to be patient.
These deals may or may not include coverage for closing costs. Utilities may be the buyer's responsibility to turn on.
That being said, short sales can be some of the best deals out there for buyers.
"Pre-approved" short sales are short sale deals where the bank(s) have approved the short sale at a given price. These should close in a "normal" time frame (30-45 days).
My definition of an "investor flip" is a situation where the current owner and seller (non-bank, private party or entity) has owned the property for LESS THAN 90 days. There are complications involving getting ultimate underwriter approval with these deals. Suffice to say, it's BEST to NOT write (loan) offers on these until AFTER the 90 day period has passed.
If the buyer is an "all cash" type, then there will not be a problem (no "lender requirements" needed, obviously).
This "90 day rule" does NOT apply to bank or HUD homes.
These are (my definition) privately owned (non-bank) homes where the seller HAS owned the property for OVER 90 days (i.e.: 91 or more). These are easy transactions with quick responses. Since the seller is a "real person" (not a bank), the seller may be willing to do repairs and possibly offer other concessions that banks usually do not. Most utilities are usually on, etc - but every deal is different, of course.
Auctions, owner/seller-carry, rent-to-own, lease-options/purchases, etc.