HUD homes are foreclosed properties that were originally purchased with FHA loans. Residential properties become HUD homes when a homeowner is unable to keep up with their monthly mortgage payments and defaults on their loan. The FHA steps in, pays the remaining mortgage balance to the lender and seizes the homeowner’s property.
In order to recoup the cost, the government will sell these homes, often slightly below market value, to encourage home buyers to purchase them. Although HUD homes are appraised to determine value and then priced accordingly, they are sold “as-is,” so no repairs or improvements are made to the home before it’s sold.
Any buyer who has the funds or can qualify for a loan is eligible to purchase a HUD home. While investors may purchase these properties, HUD homes are first offered to owner-occupant buyers, meaning, buyers who plan to make these homes their primary residence. However, they may not have purchased another HUD home in the last 2 years and must live in their newly purchased home for at least 1 year.