Interested in Buying a HUD Home?

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What are HUD Homes?

HUD homes are houses that have been acquired by the U.S. Department of Housing and Urban Development (HUD). If a foreclosed home was purchased with an FHA loan, the lender will file 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. This includes single family homes, townhouses and condos, and often they are usually in poor condition.

How Much Do HUD Homes Cost?

HUD homes should be priced at the fair market value based on their location and a bank appraisal. If the home is in need of any repairs, then the  price should be adjusted according to the cost of the repairs that need to be made by the buyer. HUD homes are usually cheaper than non HUD homes because of the repairs needed. In some areas, teachers and police officers are given a 50 percent discount on HUD homes.

How To Find HUD Homes

You can find HUD listings on their Web site at There are links to each state’s HUD web site. The HUD and state Web sites will link real estate agents who work with HUD homes, because only a registered HUD real estate broker can show you a HUD property – you cannot buy one without going through one of these agents.


Buying a HUD Home

The buying process for a HUD home is much different from a normal real estate transaction. The HUD foreclosures are sold using a bidding process. There will be an offer period, when sealed bids are accepted  –  bids from private buyers are not accepted. When the period is over, HUD will accept the highest bid. Unlike typical home sales, there is no negotiating on price.

If your bid is accepted, your agent will be notified, and you are given a settlement date. This usually takes 30-60 days from the date that the contract is accepted. HUD will only pay real estate agencies commission for the sale if specific wording is added to the contract.

Before submitting the bid, all buyers need to be pre-approved for financing. A loan commitment from a qualified lender needs to be obtained.  Since HUD does not provide financing, you need to arrange for conventional financing.

A home inspection is always important before any home purchase, but it’s especially so for HUD foreclosures. There are so many repair issue and environmental factors – asbestos, buried storage tanks, lead paint, etc. Understanding all these factors will help you determine your bidding price, especially if a lot of repairs are required. If the offer is accepted, the buyer will have 15 days to complete any inspection. It is the buyer’s responsibility to pay for the utilities to be turned on.

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