HUD repossession homes for investors

Buying a HUD Home as an Investor

What is a HUD Home?

You may be asking, “What is a HUD home?” A HUD home is a home being sold by the United States Department of Housing and Urban Development, also known as HUD.

HUD is the insurer of mortgages to homeowners through its Federal Housing Administration (FHA). As the insurer, HUD obtains these properties from lenders that have foreclosed on these properties. HUD then offers them for sale to the general public.

HUD homes can be found through your local real estate agents, and also through the HUD website, where homes for sale and brief descriptions are offered regarding each property. Information will also be given about who to contact if you’re interested in seeing a property. Please note that unless specifically indicated to the contrary, all HUD homes are sold “as is, where is.”


Buying a HUD Home

The general process for buying a HUD home is that HUD will have a registered broker market the property during an initial bid period. All offers for the property will be submitted through the registered broker via an electronic bidding process set up by HUD. All bids will be held by HUD until the end of the bid period, and at the end of the period the best offer is accepted.

If an offer is accepted by HUD, the successful bidder will have 48 hours to submit the paperwork, or the system will move on to the next highest bidder. Once HUD ratifies the contract of sale, closing generally takes place within 30 – 60 days. It should be noted that priority is given to owner occupants over investors, so the investor may not get a chance to bid on the HUD property of their dreams.


Advantages of Buying a HUD Home

The biggest advantage of buying a HUD home is the constant supply of homes offered for sale by HUD. Defaults in mortgages are always happening, and given the number of loans that HUD insures, there is always a steady supply of HUD properties becoming available.

In addition, this is an opportunity for a buyer to get a home at a good price. Because of their condition, many HUD homes are sold below market value. It is up to the buyer to assess how much repair is needed, and whether they have the capacity to do so.


Disadvantages of Buying a HUD Home

Some of the disadvantages of buying a HUD home is that not all of them are an excellent deal. It is up to the buyer to do their due diligence about the true market value of a property. A buyer should never assume that the price is good because HUD is the seller.

As previously mentioned, HUD properties are generally sold “as is, where is” meaning that what you see is what you get. Not all defects in a property will be readily transparent. It is incumbent upon the buyer to make sure everything in the home is inspected, including roofs and mechanicals.

Lastly, because the process of bidding associated with buying a HUD home can be time consuming, problems can arise as a property sits, unbeknownst to the potential buyer. While HUD homes are generally secured, problems such as burglaries, trespassing, pipe issues and roof leaks can occur. Before committing to the purchase of a HUD home, the buyer should do an additional walkthrough of the property.

Many investors are very successful in buying and flipping HUD homes, but like any real estate investing, the investor needs to do their homework and understand the process.