Do HUD Homes Have To Go To Bid?

HUD homes that have been repossessed offer a great opportunity to buy for investment or a new home with a discount. These homes were bought with loans guaranteed by the Federal Housing Administration, which is a part of the Department of Housing and Urban Development (HUD). When these homeowners default on their payments, the federal government takes possession of their properties and sell them to the highest bidder to recover the owed amount on the loan.

Once the federal government owns the property and takes control of it, the home is appraised and then priced at what the government says is a fair market value for the property. The home is then sold through a bidding process. The federal government sets up an offer period. During this offer period, you can submit a bid for the property through a licensed HUD broker (a real estate agent who is registered with HUD).

At the end of the offer period, the federal government reviews the bids and selects the bid that gives the government the highest net amount possible for the balance owed. The news is then given to your agent, and you have to settle within 1-2 months.

The bidding process requires that you participate in the bidding period in order to win the property. So, HUD homes do go to bid and are awarded to the person who enters the highest net bid for the property. This also must be done through registered brokers – so if your broker is not a certified HUD broker, he or she cannot input bids for you.

The advantages of buying HUD homes include discounted prices and high potential profit margins. Just be aware that many of them come from low-income areas, and some require extensive repairs to be certified for acceptable living conditions from some lenders.