HUD (Housing and Urban Development) is actually one of the largest government owned entities offering homes across the United States for sale, based on fair market value according to the home's current condition. These properties are sold "as is", where no repairs are allowed prior to closing and neither will HUD make repairs to satisfy any home inspection a buyer has ordered.
A HUD home is a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim.
There are general guidelines put into place prior to the HUD Property being placed on the market. There is a local asset manager who has a team of professionals that are assigned to inspect the home both inside and out, check the mechanical systems, then evaluate in their opinion what repairs would be needed while taking several photos to visually show condition as well. Locks are changed out with padlocks placed on garage doors and storage buildings. Windows throughout the home must have locks that work, making sure the home is secured.
Once that report is submitted for review, the next step begins where the home is evaluated next by an assigned real estate agent from the local area. A report is prepared with normally over 100 photos taken, including exterior and interior of the property. An opinion of market value is submitted for review.
During this time, an independent appraiser from the area will be assigned to review the home to see if it meets guidelines to be FHA insurable plus determine market value. This is where a home will be labeled as followed:
IN - Insured (without a repair escrow)
IE - Insured with repair escrow (where visual inspections show certain items would need to be repaired and/or replaced to meet FHA guidelines. Any/all repairs would be made "after" closing).
UN - Uninsured. Home has too many repairs to be classified under a repair escrow.
Shortly after this process is completed, the home is ready to be placed on the market for sale.
HUD Home Store is the listing site for HUD real estate owned (REO) single-family properties. This site provides the public, brokers, potential owner-occupants, state and local governments and nonprofit organizations a centralized location to search the inventory of HUD properties for sale. In addition, registered real estate brokers and other organizations can place bids on behalf of their clients to purchase a HUD property. HUD Home Store also includes many informative user-friendly features providing advice and guidance for consumers on the home buying process.
Who Can Buy a HUD Home?
Anyone who has the required cash or can qualify for a loan (subject to certain restrictions) may buy a HUD Home. HUD Homes are initially offered to owner-occupant purchasers (people who are buying the home as their primary residence). Following the priority period for owner occupants, unsold properties are available to all buyers, including investors.
HUD does not provide direct financing to buyers of HUD Homes. Buyers must obtain financing through either their own cash reserves or a mortgage lender. If you have the necessary available cash or can qualify for a loan (subject to certain restrictions) you may buy a HUD Home. While HUD does not provide direct financing for the purchase of a HUD Home, it may be possible for you to qualify for an FHA-insured mortgage to finance the purchase.