The Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. HUD foreclosures occur when a borrower defaults on an FHA-backed loan. HUD pays the money to the lending agency, takes over the house and sells it as quickly as possible.

Advantages of HUD Properties for Sale

• You will find HUD foreclosure homes are generally affordable, selling at far lower than average real estate prices. Also most of the complicated and costly legal issues are already resolved before the house goes for sale.
• While HUD homes are sold “as is,” HUD will mark down the price of the home automatically according to the amount of repairs needed to bring the foreclosure property up to market standard.
• HUD houses offer convenient bidding. Unlike a public auction, you submit sealed bids to HUD. In the case of multiple bids on a property, HUD will automatically take the highest bid. If HUD doesn’t get enough bids during a specific period, it may wait and accept bids after the initial period. You will be notified if your bid is accepted within 48 hours.
• HUD frequently offers additional incentives. These may include moving expense allowances and bonuses for closing the sale early.
• In addition to the lower fees and costs in the HUD foreclosure sale, the buyer can request that HUD pay all or part of the property financing and closing costs, which can amount to substantial additional savings.
• HUD will cover a listing agent’s commission up to six percent.

Disadvantages of HUD Foreclosures

• HUD auctions are not open; the bids are sealed. You need to follow when a home you are interested in will be open for offer. If you miss the offer period, you may not get your bid in on time for consideration.
• Certain restrictions discourage purchase for strictly investment purposes. For example, HUD foreclosures can only be sold to individuals who intend to reside in the premises.