The HUD Home and the Buyer

The acronym HUD stands for the Department of Housing and Urban Development and a HUD home refers to a house foreclosure that had been financed with an FHA loan.

The Federal Housing Administration (FHA) is a branch of HUD that provides federal mortgage insurance. When a foreclosed home has been financed by a loan insured by the FHA, the creditor files a claim for the outstanding money due on the mortgage. The claim will be paid by the FHA which then transfers the property to HUD and HUD then sells the home.

HUD residential foreclosures are available throughout the United States but the process for buying a HUD home is quite different to buying from a private seller.

HUD homes are appraised and priced at fair market value depending on the location. If the home requires repairs, the price will be adjusted down, taking into account the outlay the new owner must make to renovate the home. Any repairs are always the responsibility of the new owner.

In the first phase (or initial offering), HUD homes are generally available only to people wanting a home to live in. If the initial bidding process doesn’t get any interest from an owner-occupant, would-be investors can then step in.

The listings for HUD houses can only be found though HUD’s website so you will have to follow the state links found there. When you find a property that interests you, you’ll be able to view it by contacting a HUD registered agent in the area – they are listed on the website.

The only way to buy a HUD home is online. This is done with a type of auction called an “offer period.” Offers are made online and when a bid is accepted, the buyer’s agent will be notified. After the contract is accepted you will be given a settlement date, usually 30 to 60 days afterwards.

You may make an online offer for the duration of the offer period and at the end of the offer period, the offers are opened. The highest satisfactory bid is then accepted, and the buyer’s agent is contacted. Should a house not sell during the stipulated time, buyers can submit bids that will be opened as received. These bids can be made any day of the week, Monday through Sunday, even on holidays.

Potential investors would be interested to know that if there’s no offer for a HUD home during a specific period, HUD lowers the price. The price will continue to drop until an acceptable offer is made.

Savvy buyers will be aware that by checking the HUD website regularly, they can keep ahead of price changes for any properties that may interest them.

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