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.”
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:
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.
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.
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.
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.
For more information, including programs that can offer discounts to those purchasing HUD homes, as well as a list of what documents you'll need to close, see my full blog post here: http://real-estate.equifax.com/2010/10/4-tips-for-buying-hud-home.html