How To Buy A HUD Home

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Real Estate

How To Buy A HUD Home

HUD homes are homes acquired by the U.S. Department of Housing and Urban Development (HUD). If a foreclosed home was purchased with a loan insured by the Federal Housing Administration (FHA), the lender files a claim for the balance due on the mortgage. The FHA pays the claim, then transfers ownership of the property to HUD, which sells the home.

HUD homes are priced at fair market value for their location based on appraisal. Teachers and police officers are given a 50 percent discount on HUD homes. Investors often purchase HUD homes to fix up themselves and sell at a profit. HUD homes are sold as-is – HUD is not responsible for repairs and improvements.

You can view HUD listings on their Web site at The HUD Web site lists registered HUD real estate brokers, because only they can show you a HUD property.

HUD foreclosures are sold using a bidding process. There's an Offer Period, during which sealed bids are accepted from agents.  The first offer period is only for owner occupants (those buying the home to use as their primary residences).  HUD accepts the highest bid offered. Unlike conventional home sales, there is no negotiating on price between buyer and seller.  Before submitting a bid, buyers must be pre-approved for financing, and pre-approval must be submitted with the offer.

Another note about HUD foreclosures is that the buyer is responsible for having all utilities turned on for inspections.  Buyers must first get permission from the management company, and where safe, they will allow utilities to be turned on.  Buyer must be present when water is turned on to ensure that there is no leaks.  There is a preliminary inspection from the management company, however it is very basic and only inspects very few items.  Buyers should have each property inspected by an inspector of their choice. HUD does typical offer an option period, however they do not require that the buyer pay for that period.

Recently HUD has begun letting the buyer chose their preferred title company, instead of forcing them to use the HUD "preferred" title company.  A word of caution: if you (or your lender) is not ready to close as scheduled, the buyer is required to pay for any extension time.  Extensions are purchased in 15 day blocks up front.  If all 15 days are not used, the extra money will be pro-rated back to the buyer.  Please alert your lender early and often to prevent extra fee's.

To search for your next home (HUD foreclosure, other foreclosure, new build, or resale), visit my website at or call 281-628-3485