Department of Housing and
Urban Development (HUD)
residential foreclosures are
available throughout the
United States. The sales
process for purchasing a HUD
home isn't quite the same as
you'll encounter when buying
a home from an individual,
so take a few notes before
you go home shopping.
What is a HUD home?
The Federal Housing
Administration (FHA) is a
part of HUD--the part that
provides federal mortgage
insurance. If a foreclosed
home was purchased with a
loan insured by the FHA, the
lender can file a claim for
the balance due on the
mortgage. FHA pays the
lender's claim, then
transfers ownership of the
property to HUD, which sells
the home.
How much do HUD homes cost?
HUD homes are appraised,
then priced at fair market
value for their location.
The price of a home in need
of repairs is adjusted
downwards to reflect the
investment the new owner
must make to improve the
home.
Will HUD make the repairs?
HUD homes are sold as-is.
The new owner is responsible
for all repairs and
improvements.
How do I find a HUD home?
You can view HUD listings by
following state links on
HUD's Web site. Each
state's Internet destination
is set up a little
differently, so take some
time to browse the search
engines and layout.
When you've located a home
you would like to see, any
HUD-approved real estate
office can show you the
property. They are listed on
the WEb site. HUD employees
do not work with home
buyers--you must use an
agent.
Do I simply make an offer to
purchase a home?
HUD foreclosures are sold
using a bidding process.
There's an Offer Period,
during which sealed bids are
accepted from your agent. At
the end of that period, all
offers are opened. HUD will
generally accept the highest
bid, or the bid that brings
them the highest net.
If the home remains unsold
after the initial period,
bids are opened as received.
If your bid is accepted,
your agent will be notified
within a day or two. You
will be given a settlement
date, usually 30-60 days
from the date of your
accepted contract.
HUD will pay real estate
agencies a commission of up
to 6% for the sale of the
home. Be aware that to get
paid, the selling agent must
insert wording in the
contract that verifies HUD
will pay his or her
commission.
Will HUD finance the home?
HUD does not finance homes.
You'll need to arrange for
conventional or other
financing. Be sure your
financing is in order before
you make an offer. If your
bid is accepted, and you do
not close on the house, you
may lose the earnest money
deposit you submitted with
the offer.
Should I have a professional
home inspection?
Home inspections are
recommended for any home
purchase. You should inspect
a HUD foreclosure before you
make the offer to purchase.
It will help you determine a
bidding price, especially if
repairs are required.
Homes build prior to 1978
may contain lead paint, so
learn more lead paint
hazards before making an
offer. Other items to
consider are asbestos
content, buried storage
tanks, and other
environmental hazards.
Can I buy a HUD foreclosure
for investment purposes?
During the initial offering,
HUD homes are usually
available only to those who
wish to live in the home. If
an owner-occupant does not
bid on the home, investors
are allowed to enter the
bidding process.
Does HUD offer other
programs?
If foreclosures are not sold
within six months, HUD will
sell them for $1 each to
approved nonprofit
organizations and government
agencies. Homes must then be
used create housing for
families in need or to
benefit neighborhoods.
HUD offers special home
purchase programs for
teachers and full time law
enforcement officers.
