Buying repossessed homes from HUD is a process that involves more rules than some might think. Many have compared the process to buying a home in foreclosure, but while there are several similarities, there are certain rules to follow when going through with a HUD home purchase.
The first involves representation. If you want to buy a home at a foreclosure auction, you can represent yourself - in other words, you do not have to have an agent or a broker at all. HUD uses a relatively closed bidding process instead of an open auction. Bids must be submitted by real estate brokers who have been certified by HUD, so your bid has to go through them.
The second rule is that the home being purchased must be used as a primary residence. So, only homebuyers who intend on actually living in the home are initially eligible for a property. Should the property go through the initial round of bidding unsold, however, all investors and homeowners looking for a second home can then participate in the process.
Additionally, all HUD homes are sold "as-is". HUD does not make repairs to the properties before they are listed. Also, HUD does not offer mortgages on these properties; as a result, you should be pre-approved by another lender (even with an FHA or VA loan) or pay in cash.
These guidelines are pretty straightforward and make it easy for virtually any interested homeowner to make a good HUD home purchase.