What is a HUD Foreclosure?

A HUD (Dept. of Housing and Urban Development) foreclosure is basically the same as any other foreclosure except for the method the property will be sold. HUD is not a lender. They insure certain loans like FHA loans. If the loan goes into default, HUD will pay the outstanding balance of the loan to the lender. The home then becomes the property of HUD.

HUD will then sell the property through an outside marketing and management company. The property can be purchased by anyone, but is must be done through a realtor or a real etate brokerage company that is registered to do so with HUD. You cannot access the property without a registered realtor.

What makes the HUD foreclosure sale process different is that they use a bidding system. . Once the house is available for sale, all bids must be made during an open bidding period. During this time period, bidding is open to the general public. Investors cannot bid during that period. The bids must be put in by a registered licensed realtor or broker. If the home dosen't sell during that first bidding period, then it becomes open to everyone including investors, during the next bidding period. These bidding periods will continue until the property is sold.

Many people are under the false impression that HUD homes are run down, undesirable properties. That is not true. Some might be in need of repair just like any other foreclosure. However, in my experience as a realtor, most are no different than any other foreclosed property and might not need any significant repairs. In addition HUD provides funds in escrow for repairs up to a certain amount.

HUD foreclosures can be a great deal. Just make sure you are pre-approved and have visited the properties to see if they are a fit for what you need.