Where $1 will buy a house

HUD has several programs for selling foreclosures that land in the government's lap after FHA-insured mortgages fail. The most-used are these:

• Individuals can buy foreclosed single-family houses from HUD. Those who will live in the homes get first pick. Next, they're offered to investors. (Read "Save big money by buying foreclosures.") The houses are listed by management companies that contract with the government. (See listings in your state here.)

• Teachers, firefighters, police officers and emergency medical technicians may be able to get 50% off the cost of a HUD home (learn more here about the Good Neighbor Next Door Sales Program) if they live in an area specially targeted by HUD for revitalization. The idea is to get stable owners and families to live in these neighborhoods. Buyers have to live there for at least three years or pay full price.

The fate of Dollar Homes

Baltimore was once the biggest buyer of Dollar Homes in the country. Between 2002 and 2004, the St. Ambrose Housing Aid Center, working with the city, bought 71 houses for a dollar each. It fixed them up and resold them for a profit of $10,000 to $15,000, says David Sann, the nonprofit group's housing director.

St. Ambrose plowed the profits into its other programs, such as its low-income rentals. The refurbished Dollar Homes gave Baltimore residents -- those earning 60% to 100% of the local median were eligible -- a chance at owning a solid, rehabbed home.

But there have been no Dollar Homes in Baltimore for years, Sann says. "FHA lost its market share to the conventional marketplace; they went from like 40% of the market down to about 3%."

Few houses make it to the program. Maggiano calls it "the bottom of the line" for HUD foreclosures. Those that do are older and likely to be pretty beat-up. Though there are plenty of newer homes in foreclosure, they sell first.

In Baltimore, the Dollar Homes needed new roofs, windows, carpets, heating and hot-water systems, entire kitchens, appliances, plumbing and electric fixtures, wall repairs, refinished floors and sometimes complete rewiring. "They were in pretty tough shape, by and large," Sann says.

Maggiano hopes at least some of the houses purchased this year will become rentals. "That's really where much of the need is at the moment," she says. "Folks are being foreclosed, their credit's shot, and they need a place to live."

Published Nov. 11, 2008

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