Anyone! HUD foreclosures are for low- and medium-level income people. You must qualify for a loan before you participate in bidding for a foreclosed home sold by HUD. HUD gives priority to owner occupants. Teachers and law enforcement officers have some privileges in buying HUD foreclosure homes.

HUD can help you in repairs, financing, and in paying closing costs

HUD sells foreclosed real estate properties “as-is” and carry no warranty by HUD. Most HUD homes need repairs. That’s why HUD foreclosures are at lower prices allowing new owner to spend money to fix them up.

HUD can give you allowance for repairs, help you in financing, and even pay your closing costs. However, remember that such costs and expenses are added to your bidding price.

Get a pre approval letter first!

Find a HUD-approved lender
Make your hand strong not only to negotiate better with the owners or banks selling their foreclosed properties but also being ready to bid for HUD foreclosure properties.
Ask your lender to make the pre approval letter valid for 60 days.
Give a copy of your pre approval letter to your real estate agent before bidding.

How can you find HUD foreclosure homes?

HUD web site contains HUD foreclosure listings by state
Your real estate agent. You need one to participate in bidding. He or she may have more information than simple listing.

History of previous foreclosure sales gives you a better perspective about the regions and prices bid and awarded.

Opportunities for HUD-Owned Homes

Properties owned by the Department of Housing and Urban Development (HUD) are the most popular. HUD/FHA (Federal Housing Authority) does not make the loan; it only insures the lender against loss in the event of default. FHA helps you when you cannot obtain a conventional loan.

With FHA insurance, the conventional lender feels comfortable extending you the loan you want. Furthermore, you can get the loan with minimal down payment since a government agency supports your loan.

HUD provides insurance to lenders that extend loans to homebuyers under the FHA based on the home’s market value (after-repair value).

Your lender orders an appraisal to:

Estimate the value of the house
Make sure that the house meets FHA minimum property standards
Ensure that the house is marketable

Remember: Appraisals are for lenders (and also for the FHA in this case). Home inspections benefit buyers.

For housing counseling information in your state: U.S. Department of Housing and Urban Development

HUD-Owned Homes: How Does It Work?

The lender files a claim with the FHA when the homeowner cannot pay his/her installments. Then, HUD takes over the ownership and sells the property. Many HUD-owned properties are sold at below-market prices with allowance for repairs.

When you apply for a mortgage loan through an approved HUD lender (most banks) your lender determines whether your application will be accepted. Once accepted, the lender gives you the money. Then, the lender receives an insurance policy from HUD that protects its financial interest. HUD insures homes if they meet its standards.

Private lenders finance the purchases encouraged by such insurance. If the borrower fails to make mortgage payments, the house is sold at a foreclosure sale. The lender goes to HUD with its insurance information and asks for payment. HUD pays (reimburses the lender) for the property and owns it. Finally, HUD sells the property as a foreclosure property through approved real estate brokers and agents.

Reminder: HUD foreclosure homes are offered to owner-occupants first. Investors come later.

If you are planning to buy properties in revitalization areas,

U.S. Department of Housing and Urban Development (HUD) has a special program for this purpose.

How can you bid for HUD foreclosure?

Find a real estate agent specializing in HUD and VA foreclosure sales.
Get a listing of available foreclosure houses from your agent.
Ask your real estate agent to prepare Comparative Market Analysis (CMA) for real estate properties in the same area.
Compare prices of the houses in the neighborhood and determine your price. Take into account the closing costs if you are going to pay. Again, you can ask HUD to pay for closing costs.
Ask your real estate agent to prepare the bidding form.

See Frequently Asked Questions for more information on buying HUD foreclosures.

Currently, First Preston is the largest private sector contractor for the U.S. Department of Housing and Urban Development's Real Estate Owned (REO) program. Under this program, First Preston provides total asset management and sales services for thousands of single family properties in 25 states, marketing them to prospective buyers over a unique Internet-based bidding system.