While lenders are responsible for the majority of foreclosures, they are not the only ones who do so. In some cases, the government itself, through various agencies, can initiate the foreclosure process. Leading this effort is the Department of Housing and Urban Development (HUD). As such, the homes they foreclose are called HUD homes.

HUD Homes Explained

HUD is part of a huge government-led housing program that targets low- and moderate-income families as well as first-time homeowners, offering them the opportunity to achieve the American Dream of affordable homeownership.

How does the government come to own foreclosed homes? Some properties are insured through a HUD mortgage. When this property is foreclosed, HUD pays the amount owed to the lender. Expenses are recovered by putting the foreclosed property up for auction below its market value.

In this way, the lenders get their money back without any hassle. HUD homes sold at auction often sell well below their appraised market value. This translates into a lot of savings for potential homeowners and investors.

Buying HUD Homes

If you have the money or qualify for a mortgage, you have the option to purchase HUD homes. However, HUD does not provide financing, so you will have to apply for a mortgage elsewhere. Lenders are often the guys to go to for this. However, if you qualify, you can finance your new home through an FHA-insured mortgage.

HUD homes are sold “as is” with no warranties guaranteed by the auction. Some houses will not be in perfect condition and will require minor or major repairs. Offers are accepted during an offer period established by HUD. After this period, all offers are analyzed and the highest offer wins. If the foreclosed property does not sell within the offer period, offers will be accepted on any business day.

Unlike short sales and foreclosures, HUD homes are relatively hassle-free. Buyers don’t have to jump through hoops, which is nice. Real estate agents are often notified within 48 hours if their offer is accepted.

The purchase process

HUD homes that are for sale are listed on the HUD website. Only real estate agents can bid, so you should hire one if you’re interested. He will set up and present your offer for you.

If your offer is accepted, your real estate agent will help you through the process. A settlement date is usually set with one or two months. To add even more savings, HUD typically pays the seller’s commission, including all other sales commissions up to 6 percent.

Please note that priority is given to owner-occupants of properties listed within the first 10 calendar days. All offers received within five days of this period are reviewed on the sixth day. The highest bid from the net owner-occupant bidder wins. If there are no offers within this period, daily offers will be accepted from investors, among others. Only after the 10-day period will investors’ offers be considered.

About 30,000 single-family homes are in HUD’s inventory across the country, including territories like the Virgin Islands, Guamand and Puerto Rico.