HUD Homes are merely FHA financed homes that went to foreclosure, since they are insured by Housing and Urban Development, HUD ends up owning the home instead of the bank. The process for purchasing HUD homes is an online auction. The values are set and I have to tell you, there is definitely some inconsistencies in the various properties and their asking prices. So yes they can be bargains, HUD does things that are different that just complicates the process. For one they don't provide title insurance and if your Realtor is not that savvy, you could end up with a home with major title challenges! HUD does offer special low cost financing and incentives to make the purchase of a home home easier.
REO/Foreclosures are probably more consistent with the way they evaluate and market the homes. You're not bidding against anyone else in a blind bid. They are marketed just like any other Home listing. There are things to know about the best way to find the bargains and how to negotiate effectively with the banks, but would be very long for one blog. I am a real estate broker with a contract to sell both Countrywide REO homes and I have a contract to Market HUD Homes in my County. My real estate company's 25th Anniversary is today 10/23/1983, got questions ask away.