HUD is an acronym for the Department of Housing and Urban Development, a government agency that was established in 1965. President Lyndon B. Johnson established HUD as part of an effort to combat poverty. Through its federal policies and programs, the agency ensures that all individuals in urban areas have access to quality housing that is inclusive and affordable.

Because it’s a cabinet-level federal agency, HUD is run by a secretary, who is appointed by the president and approved by the Senate. Among other responsibilities, the HUD Secretary supervises the Federal Housing Administration and manages public programs that aid in community development and provide citizens with rental assistance.

Through the FHA, HUD helps home buyers who don’t qualify for conventional loans obtain affordable mortgages. The FHA’s mortgage insurance program offers low-income home buyers, or those with bad credit, the ability to qualify for FHA loans, which are secured by the government.

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.

In order to further motivate individuals to purchase HUD homes, the agency provides certain incentives to home buyers. Some of the grants, vouchers and buyers programs that HUD offers include:

• Housing Choice Voucher Program (Section 8): Enables low-income families to afford homeownership by providing a recurring subsidy that assists them in making their monthly mortgage payments.
• One Dollar Program: Allows low- or moderate-income families to purchase HUD homes – which have been on the market for over 6 months – for only $1.
• Good Neighbor Next Door Program: Helps public servants, like teachers, police officers, firefighters and emergency medical technicians, afford homeownership by providing them with 50% off the purchasing price of homes located in revitalization areas.
• Non-Profit Program: Permits community and religious not-for-profit organizations to buy HUD homes for 30% off, so they can fix them up and resell them to first-time home buyers and financially strapped families.
• HUD $100 Down Program: Makes homeownership possible for owner-occupant buyers by forgoing the typical 3.5% requirement and allowing them to make a down payment of just $100.

If you’re interested in purchasing a HUD home, you should understand what this process looks like and how it differs from buying a traditional home. HUD homes are not listed on the Multiple Listing Service, so you won’t find them among your average home listings. HUD homes are instead listed on HUD’s website, HudHomeStore.com.

Unlike regular homes sold on the market, HUD homes are sold at auction. In order to view and bid on these homes, you must hire a real estate agent who has been approved by HUD. There is a 30-day period of time during which bids from owner-occupant buyers are accepted. Once the period ends, HUD reviews all of the bids and chooses the highest offer. If none of the offers are deemed high enough, the bidding process is extended and opened up to investors.

• Lower Pricing: Because HUD homes have gone into foreclosure, HUD is eager to recoup costs quickly. As a result, HUD homes tend to be priced slightly below market value.
• Priority Over Investors: Buyers, who tend to make a HUD home their primary residence, are given a 30-day window in which they can bid on the property before the auction is opened up to investors.
• Closing Cost Assistance: HUD will spend up to 5% of the purchase price to pay for closing costs.
• Low Down Payment: HUD enables buyers to make lower down payments and offers down payment incentives – like the HUD $100 Down Program – in certain circumstances.

• Must Use HUD-Approved Agent: In order to view and bid on HUD homes, you must enlist the help of a real estate agent who’s registered with the agency.
• Home Is Sold “As-Is”: There is no negotiating with HUD – the agency will not offer to do work on the home regardless of the condition it is in.
• Restrictions On Selling: Owner-occupant buyers must live in the home for at least 1 year, and they may not purchase another HUD home for at least 2 years afterward.

Brokers will have to notify the Field Service Manager (FSM) that they are requesting utilities be turned on and follow their policies and procedures for utility activation. The contact information for the FSM is provided in the contract package that is issued to listing brokers once a contract has been accepted.

Each listing on www.HUDHomeStore.com has a Bid Submission Deadline. It is located directly beneath the Case Number and Eligible Bidders on the Property Details page of each property. Please be advised that the Bid Submission deadline is Central Standard Time (CST). The Bid Submission Deadline will change as it progresses through the various Listing Periods.

You cannot submit an offer without an active NAID #. The purchaser(s) will need to contact a broker with an active NAID # to submit the bid. A list of active NAID brokers is listed on www.HUDHomeStore.com under the Find a Broker section.

An Owner Occupant purchaser is a person who plans to live in the property as their primary residence for the first 12 months after the close of escrow and has not purchased another HUD Home as an Owner Occupant within the past 24 months.

An Investor purchaser is someone who buys the property as a second home or as an investment, or who does not qualify as an owner occupant.

Certain property eligibilities allow Good Neighbor Next Door participants, HUD registered nonprofit organizations, and/or government entities to bid on the property prior to becoming available to Owner Occupant bids. These properties, which are usually located in HUD designated revitalization areas or are determined to be uninsurable, are available in the Lottery period for seven (7) days. If there are no winning bids when the Lottery period ends, these properties then enter the Exclusive Listing Period for 5 or 30 days, depending on the insurability of the property.

This is the listing period after the Exclusive Listing Period has ended. All bidders are eligible to place a bid in the Extended Listing Period.

Please be advised that bids can only be modified and/or withdrawn prior to the expiration of the current bid submission deadline you submitted your offer under.

You may modify and/or withdraw your bid by logging in to your Bidder profile on www.HUDHomeStore.com and clicking on Bidder Functions. You will need to enter at least one of the following pieces of information to retrieve your offer information: Bid Confirmation Number, Property Case Number (aka FHA Case Number), Purchaser Last Name, or the Purchaser SSN/EIN.

Select the Bid Confirmation Link of the offer you wish to modify/withdraw. The next screen will show you the details of the bid. Click on the Withdraw Bid or Modify Bid button at the bottom of the screen.

Please be advised that if you modify your offer your bid confirmation number will change!

No, HUD will not renegotiate the amounts in your offer after bid acceptance. Purchasers have the option to cancel their bid acceptance and submit a revised offer if and when the property is relisted. However, please be advised that there may be back up offers in place. Should you cancel your offer, the property will be offered to any back up offer purchasers prior to relisting it on the HUD Homestore. There is also no guarantee that a property will be relisted at all.

EMD refunds and forfeitures are reviewed on a case by case basis. Please review the HUD Forfeiture and Extension Policy for specific scenarios regarding EMD forfeitures/refunds.

The buyer has a 15 day period after contract ratification (execution) to activate utilities and complete the home inspection. All inspections, tests, and risk assessments are performed at the purchaser’s expense.

The closing agent (per their contract with HUD) has 30 days to send out commission checks.