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4 Tips for Buying a HUD Home

Written by Ilyce Glink on October 29, 2010 in Real Estate  |   44 comments

A HUD home is nothing more than a house that was purchased with an FHA loan that has since fallen into foreclosure. (I’m not sure why these homes aren’t called “FHA foreclosures,” which would be more intuitive for home buyers and investors, but the Department…

HUD Homebuyer option

A HUD home is nothing more than a house that was purchased with an FHA loan that has since fallen into foreclosure.

(I’m not sure why these homes aren’t called “FHA foreclosures,” which would be more intuitive for home buyers and investors, but the Department of Housing and Urban Development [HUD] is the federal office that takes ultimate responsibility for FHA and its home loans gone wrong.)

Buying a HUD home is different from buying another type of foreclosed property. For starters, HUD homes are sold exclusively online in an auction process known as an “offer period.”

You may make an online offer during the offer period. At the end of the offer period, all offers are opened and considered to be received simultaneously. The highest acceptable net bid is then accepted, and the buyer’s agent is contacted.

If the home isn’t sold in the initial offer period, buyers may submit a bid any day of the week, including weekends and holidays. Bids are opened the next day.

What you probably don’t know is that if no one makes an offer for a HUD home within a certain amount of time, HUD lowers the price. The price of the HUD home continues to drop until an offer is made and accepted.

How do you find out if your bid was accepted? It’s your agent’s responsibility to check the website to see if your bid was accepted and to complete all the necessary paperwork.

Companies like PEMCO Ltd. are direct contractors with the government. They list and sell these homes online from HUD. Only agents who are registered with HUD may represent buyers and investors in the purchase of these properties.

There used to be a different site for different areas of the country, but it’s been consolidated into one website: www.hudhomestore.com.

How can you navigate the website and find the right home to buy? Follow these four tips for buying a HUD home:

  1. Find the right real estate agent. Only real estate agents who are registered with HUD may represent home buyers and investors in the purchase of HUD homes online. But just because an agent is registered with HUD doesn’t mean he or she is going to be the best agent to represent you in the purchase of a HUD home. To find the right agent, you can search through the website that lists HUD homes in your area and find out which agents represented the most winning bids. Interview the top two or three agents. Be sure to ask how long the agent has represented buyers and investors, how the process typically works, whether the agent will accompany you to inspect the property, and what special knowledge the agent has garnered from writing so many winning bids.
  2. Inspect the property before making an offer. The local listing broker (who should be listed on the HUD home website) can gain access to the property and show it to you. However, you don’t need to call the listing broker to see the house with your agent. Any HUD registered agent can gain access to a HUD home. When you’re inspecting the property, take a lot of notes and photos of the property so you can be mindful of any improvements that need to be made when constructing your offer.
  3. Make an offer. The offer process on a HUD home is probably different from what you’re used to. Offers can be cancelled with no earnest money forfeiture. Once an offer is submitted, it can be cancelled before the HUD agent opens the bid electronically, or after by sending an email to the company managing the home. Until the contract is signed, the earnest money is not in jeopardy, so there are a few days after the bid is accepted to cancel.
  4. Be ready to close on your HUD home. Right now you might forty-five to sixty days to close on your HUD home, but HUD is moving toward 30-day contracts so get your financing together ahead of time. You may be able to qualify for FHA financing or special FHA deals, like the $100 Down Payment Incentive program or the Good Neighbor Next Door program, which offers a discount for HUD homes to law enforcement officers, teachers, firefighters, and emergency medical technicians who meet eligibility requirements. But it helps if you get your loan documentation together ahead of time, including your W-2; your paycheck stubs; your tax returns; copies of your savings, investment, and retirement accounts; and documentation of other assets and liabilities. You’ll need to provide copies of your driver’s license and other identifying information. Create a file for these documents so they’re ready when you are. You will also have to submit a prequalification letter with the sales contract in order for it to be accepted. The letter must indicate the buyer is qualified for the amount of the contract, the type of financing and any assets that have been verified for closing.

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and at the Home Equity blog for CBS MoneyWatch.


Want to Buy a New House? Beware Developers Hawking Empty Subdivisions
Is It Worth It to Appeal Your Property Taxes?
Should I Refinance Now?
Renting vs. Owning Property: How to Make the Call?

The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.


  1. Katie says:

    Are HUD homes typically cheaper?

  2. Editor, Equifax Personal Finance Blog says:

    Greg Freeman via ActiveRain:

    Great post. thanks for sharing. HUDs have been good for me.


  3. Editor, Equifax Personal Finance Blog says:

    Comment from Lynn via ActiveRain:

    Ilyce, good information. Seems there is more and more HUD homes coming on the market.


  4. Editor, Equifax Personal Finance Blog says:

    Comment from Jose via ActiveRain:

    Ilyce, it is my understanding that not all "FHA foreclosures" end up becoming a HUD home. I believe each bank that issued the mortgage with FHA insurance has the ultimate decision if they are going to submit a claim to FHA. This is the reason why there are not that many HUD homes available.

    Thank you for posting this information. It was a good summary.


  5. Ilyce Glink says:


    HUD Homes can be quite inexpensive. But there are other benefits of buying them, including getting a full inspection report before you even place your bid. Be very careful to work with someone who really knows what they're doing. You'll need an agent who is able to handle the bidding process for you. Good luck.

  6. Étienne says:

    This is the wonderful article, And i agree with you, Buying a HUD home is different from buying another type of foreclosed property. For starters, HUD homes are sold exclusively online in an auction process known as an “offer period.Only real estate agents who are registered with HUD may represent home buyers and investors in the purchase of HUD homes online. And these all the great tips.
    Lake Placid Real Estate

  7. Shawn says:

    I just bought one. Or am in the process. The location was ideal so I bid 1k over their asking price which I was told is typically 30% off its suggested value. My agent has that used car salesman vibe but similar units in the complex are about 30% more. I placed my bid during the 10 day sealed bidding period and heard nothing after 10 days so I assumed I had lost. Then a month later the agent came back to me saying my bid was a backup bid and won. Now I’m scrambling to get the financing done.

  8. Germaine says:

    Do you get a “CLEAN” TITLE when you purchase a HUD Home? Or do you have to pay for any LIENS, and over due HOA fees that are due or the property.

  9. Floyd says:

    WOW, I live in South Carolina and plan on relocating to Texas in the near future. This article was full of information that I didn’t know but need so that I can keep my options open for my future home purchase. Thank you so much for sharing your knowledge.

  10. AL,10/31/2013 3:36PM says:

    If no one makes an offer & the price goes down where do you see that published? Escrow deposits are what percentage of the purchase contracts?


    • Jo says:

      Al~ I don’t know how it works by you, but in my state EMD is $1000 if the house is $50K+ and $500 if it is under 50K. On the HUD website, when the price gets reduced, you can tell when you look at the listing. The current price will be listed & the appraised value listed will be higher. I typically check the HUD listings daily when I am watching a house.

  11. Paul Stevens says:

    I’m 30 days into the purchase of a HUD home through Pemco. Everything is signed and I’m waiting for a phone call to pay.

    We just found out the the apartment complex as a whole has a lien placed on it from the county (Water, sewage and trash). The unit itself is clear.

    What are your thoughts? I was under the impression that all HUD properties are free and clear of all liens.

    Thank you.

    • Anonymous says:

      Hi Paul,

      I have sold real estate for over 20 years, and every time I have sold a HUD home, the title company has required that all prior liens, taxes, and any former bills be paid by by HUD befor they will allow the property to close. Check with your agent, and have them call the title company and ask if that is being taken care of.

  12. Cliff Adkins says:

    The best advice is DON’T Purchase a HUD property!!! If the contract says subject to home inspection, then you are out of luck in getting your earnest money back if there are items that prohibit you from buying the property. Pemco LTD is a group of unskilled overpaid employees who serve no useful propose. The contracted closing attorney is working only to rip you off!!
    If you find a Fanny-Mae house buy it, no problems and a very professional group to do business with. HUD is a joke and a burden on the tax payers as well as any one who bids on their houses.

  13. Lily says:

    I agree with Cliff. Never never by from HUD. They ripped my husband and me off for over $25,000.
    HUD posted the wrong pictures and address online. We closed and renovations all complete. 6 weeks into closing we get a call from Ky Housing stating were squanders and were trespassing in their property. The same day Ky housing had transferred the title to HUD for the home we thought we purchased. Now we have a mechanical lien against Ky Housing and Hud and we have to go to court. It’s been an absolute nightmare. I have contacted Mr. Donavan top of the chain of command to the legal department in Ky Housing. I have never been so mistreated by anyone. Now were having to file a lawsuit. both organizations should be shut down. There incompetent in running a successful business. I can’t wait to meet these genius’s in court!

    • Tracey says:

      So what is going on with this? We are in Florida and are finding ourselves in a similar situation and have been basically told they do not have to respond to any of our concerns. We are about to contact an attorney. We are at the place of are we fighting a battle we can’t win and cut our losses or should we fight for justice

  14. Susan says:

    Hi! We are in the process of buying a HUD home. We placed a bid and it was accepted. We had the home inspection done. The title company has said that a judicial deed is needed. Which I am not sure I understand. So we have had to file an extension, give proof of funds again and are waiting, I assume, for HUD to get the deed in their name. Hopefully this will be done soon.

    • Pie says:

      I am alos in the process and its been a struggle. This is the first HUD listing that my agent has done. Thanks to her, we have missed almost every deadline. It has been a lot of back and forth. We have resubmitted several different documents because they were not EXACTLY what HUD wanted. Now Im being told that I cant get the water turned on for the inspection. Im really not understanding this and my agent isn’t helping much at all. Im so frustrated.

      • Cheap Buyer says:

        HUD will give you a 72 hour window to have the utilities turned on at your own costs so that you can have the water, electric, HVAC, and such inspected. We are in the process of buying a HUD home and this has taken 6 months. It is crazy but we are getting a better deal now than when we started 6 months ago. They cancelled our contract because they couldn’t produce a clear title. Then the next week HUD stated it was clear and we had right to first refusal. We passed and the home went back on the market. We waited a bit and started bidding again and we are buying the home now for less than we were six months ago. HUD is definitely a waste of tax payers money.

    • Kim says:

      HUD accepted our offer on a home, we were under contract, then they did nothing. We were told the day of the end of our contract that the title wasn’t clear and they needed time and we could extend the contract another two weeks (at our expense). Then another two week extension, then another. All this time they would not let us know what was going on and told us they didn’t need to tell us anything and we would be told things only when they chose to do so. Then during the third extension, they just cancelled the contract because they didn’t foreclose properly a year ago. SO much money and time lost. Frustration was unbelievable.

      • Tanisha P. says:

        I am in the process of purchasing a HUD home and I was advised by my Realtor to hire an attorney. I believe it is in the best interest of the buyer to always hire a realestate attorney for representation when investing in Realestate. Although it may cost, it is less costly in the long run.

  15. kyle says:

    HUD has over charged us in closing cost and keeps increasing our costs. They have not paid for anything they were suppose to pay and refuse to pay for a busted water pipe. We have had to pay $1000 in title fees and we’re forced to use their title company. NEVER – run from any HUD property. Whatever deal it appears you are getting -you will not be by close.

  16. Drew says:

    We are interested in a HUD home and want to make a bid but still need to sell our current home, bad idea???

  17. Sheila says:

    We are bidding on a HUD home and it was very close to asking plus 20% down and they rejected us, we have excellent credit scores and never defaulted, I dont understand the thinking behind holding onto empty homes, shame on HUD homes for there greed!

  18. Leanne R. says:

    I made a bid on a hud home..tried to give earnest money.he won’t take it, told me not required..later I called him several times..he flat told me to look at another home. House stayed for sale for several months a least three.. months later it was sold. I had the money in my saving to pay up front. I really wanted this house. How do I report him? I have proof I was there. He did me wrong..I offered asking price and more.

  19. Simon says:

    Made a bid on HUD home well above asking price. They didn’t respond for a period of time so I kept lowering my bid. Eventually they said my bid (still over asking price) was rejected and it would be taken off the market and not listed for at least another year. Why? No idea. It came back on the market now just a few weeks later with a lower asking price. My bid was to pay in full. IN CASH! Why would an offer like this be rejected? Especially if there isn’t a better one? It doesn’t make any sense.

  20. Paul P. says:

    If an house is listed as investment (all bidders) and purchase as owner occupy, can it be used as investment home?

    • Ilyce Glink, Managing Editor says:

      Hi Paul:

      If you’re looking at HudHomeStore.com, homes are initially listed for a priority period as “owner occupied,” in order to give homeowners who plan to live in the home first dibs beyond investors who might come to the table with cash. After the priority period, which is usually two weeks, unsold properties are then made available to all buyers, including investors.

      If you buy after the first two weeks, when the property is made available to everyone, then you should be able to use it as an investment home. For more details, please call the agent who is representing you on the site.

      Thanks for your question.

  21. lupe says:

    What is closing cost on a cash home of 61,000

  22. Christine says:

    Realtor told me my bid was accepted but I haven’t had the property inspected. No papers signed yet. What am I liable for if I change my mind after inspection?

  23. Brent says:

    We looked at a HUD home with an agent and the sign of the things that you can not cancel after due to what you find in an inspection so can you inspect it with plumbers and whatnot before you put an offer on it?

  24. Shelly says:

    Is it easier to purchase a HUD home with Cash? Are there any stipulations on that?

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