Buying a HUD Home

What is a HUD home?

Buying a HUD home

Buying a HUD home

HUD is the acronym for The Department of Housing and Urban Development, a US government agency that provides a guarantee to lenders that use the FHA loan program.  If payments on a property financed with an FHA loan  are not kept up, the home will eventually go into foreclosure.  HUD will then make a payment of the guaranteed amount to the lending bank, and will in return take title to the home.

HUD will then list the home at its appraised market value, with a HUD-approved listing agent.

Before You Buy a HUD Home 

There are two requirements for every bidder, whether an owner-occupier or an investor:

1.      Letter of Pre-Qualification.  Bidders must provide a letter from a lending institution, indicating they are able to qualify for a loan at least equal to the amount of their bid.  The only exception to this rule is for bidders who intend to pay all cash.  In this case, the bidder must submit a statement, from a bank or other institution, showing “proof of available funds”.

2.      Earnest Money DepositHUD requires an earnest money deposit (EMD) be placed in escrow for every successful bid on a HUD Home.  This deposit is not related to the down-payment required for any loan arranged to purchase the HUD home.  The EMD is the amount needed to be paid with the submission of the contract documents and the down payment is the amount needed at settlement to make up any shortfall between the loan amount and the purchase price.

The earnest money deposit is $500 for properties up to $50,000 and $1,000 for $50,001 and up.

The amount of the down payment can be anywhere from 10% to 30% with a conventional loan, but it could be as low as 3.5% with an FHA loan.

Search For A HUD Home

Once those initial requirements are met, it’s time to start the search for a HUD Home.  The easiest way to do this is to go to the HUDHomeStore website and follow the instructions there to search the areas in which you are interested. Alternatively, we can conduct daily searches for you and update you by email.

Once you have identified a home you are interested in, email me at, or call me at (540) 538-9928, with details of the home and your contact information and we can set up an appointment to show you the home(s) you have selected.

Bidding on a HUD Home

Once you have found a house that you want to buy, we need to start the process by bidding on the property.  Buyers are not allowed to submit a bid directly to HUD; it must be done by a HUD-approved agent with a NAID (name and address identification number).  The bid is submitted electronically, using the bidder’s full legal name, SSN and address. Bids are accepted by HUD until midnight each day, at which time they are reviewed and successful bidders will be notified the following day. Bids received on weekends or holidays will be opened the first business day following.  If the bid is not accepted, HUD may make a counter-offer, or may just refuse the bid.  The agent submitting the bid can access the HUD website to determine what response was made to the bid and the result is also usually sent to the agent via email.

If a bid is not accepted a new bid (for the same, or a different, amount) can be submitted every day, until the home is sold.

Unlike a traditional real estate transaction, if a counter-offer has been made by HUD, it is not possible just to accept it.  The counter-offer will have been sent to every person who previously bid on the property, and anyone can submit a new bid or a counter-offer to HUD’s counter-offer.

It is important to discuss your bidding strategy with your agent to ensure the best chance of getting the HUD home at the best possible price.

After Acceptance

Once you have a bid accepted, you have to move quickly.  You are required to submit the completed sales contract and supporting documents to HUD within 48 hours.  But, because the papers have to be sent overnight by UPS to arrive within the 48-hour period, you effectively have only 24 hours to get everything completed.

When the documents have been sent off, it’s time to arrange financing, home inspections, utility inspections, appraisals, and insurance inspections – all of which we can set up for you.

HUD does not warrant the condition of its properties and will not pay for the correction of defects or repairs. Since the new owner will be responsible for making needed repairs, HUD strongly urges every potential homebuyer to get a professional inspection carried out.  Ideally, this might be done before submitting an offer to purchase, but HUD allows 15 days after the acceptance of the contract to have this done.  If the buyer decides not to complete the transaction following the inspection, it is likely that the earnest money deposit will be forfeited – although that is somewhat negotiable.

As soon as your financing is approved the mortgage company submits a closing package to an approved title company.  All of this must be done in time to close within 45 days for an owner-occupant, or 30 days for an investor.

Settlement – Closing on Your HUD Home 

The closing will take place We will schedule a closing date at a HUD-approved title company.  At the closing table you will sign all the loan documents and the legal contracts.  The funds from the lender will have been wired directly to the closing agent the previous day, but you will pay any down payment needed. You will then receive the keys.

It is strongly recommended that you change the locks on your new home immediately to eliminate the possibility of other people gaining access – all HUD-approved agents have a full set of keys for all HUD properties.

Congratulations you now own a HUD Home!

Frequently Asked Questions

1. What is HUD?

HUD homesThe U.S. Department of Housing and Urban Development. Please visit for additional information.

2. Do I need a realtor to place a bid for me?

Yes, you must use an agent who is registered to bid with HUD.  Chris Lewis is a HUD-registered agent.

3. How do I find a property to bid on?

Log onto to search for available HUD properties.

4. How can I obtain financing for my property?

Please contact Chris Lewis for advice on lenders or mortgage brokers with experience with financing HUD homes.

5. Do owner-occupants have a priority in bidding?

Yes, there is an initial owner-occupant period set aside at the beginning of the bid process.  It is usually 30 days.

6. What is the Good Neighbor Next Door (GNND) program?

The good neighbor next door program allows teachers, police officers, fire fighters and EMS personnel to purchase HUD properties that are located in a revitalization area for a 50% discount if they live in the property for 36 months. More information is available online: Good Neighbor Program.

7. What are my financing options?

You can use FHA or conventional financing to purchase a HUD home. You may also purchase a property with cash.

8. How can I locate a home in a particular area (e.g. by zip code or state)?

You may conduct a search by visiting

9. What is a field service manager?

The Field Service Manager (FSM) is the HUD contractor responsible for property maintenance and preservation services such as: inspecting the property, securing the property, performing cosmetic enhancements/ repairs, and providing on-going maintenance.

10. What is an asset manager?

The HUD contractor responsible for marketing and selling HUD-owned properties.

11. I am an investor. When can I bid on a HUD property?

During the exclusive listing period, bids may be submitted by Owner Occupants. At the conclusion of this exclusive listing priority period (usually 30 days), all general public bids will be accepted.

13. Can a buyer elect to use his or her own closing agent?

The purchaser can elect to choose any closing agent. However, if the purchaser elects not to use HUD’s closing agent to perform the closing, HUD will not pay for the closing agent to conduct the closing.

14. If I don’t like the home that I chose, can I decline the acceptance?

The purchase of the property may be declined at any time, but may be subject to earnest money forfeiture.

15. What is the earnest money held for, and can I get it back?

Earnest Money is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious about wanting to complete the purchase.

If the seller accepts the offer, the earnest money is held in escrow by the real estate broker or by a settlement or title company until closing and is then applied to the buyer’s portion of the remaining costs. If the offer is rejected, the earnest money is usually returned, since no binding contract has been entered into. If the buyer retracts the offer or does not fulfill its obligations under the contract, the earnest money is forfeited.

18. When can I complete a home inspection on the property?

All purchasers are strongly encouraged to perform a walk through inspection at or near the date of your contract acceptance and, again, immediately PRIOR to closing. If a purchaser discovers a property condition that did not exist at the time of sale they must immediately notify HUD’s property manager of the damage. The purchaser or agent should complete the Property Damage Report and fax it to the appropriate fax number listed on the form. Reporting the damage does not guarantee the correction of the problem that has been discovered. The lack of written documentation describing property condition at contract acceptance, however, will preclude consideration for repairs or price adjustments in the event of subsequent damage. Each case will be looked at independently and a determination will be made as to whether the damage will be repaired (or not repaired) or, under some circumstances, credits given at closing. The buyer assumes full responsibility for the property and its condition on the date of closing. HUD assumes no responsibility and will make no settlement for damages reported to HUD after the close of escrow.

19. Can I make repairs to the property if needed prior to purchase?

HUD properties are sold as-is with no warranty. No repairs can be performed on a property until after the new owner has taken possession of the property.

20. Does HUD give money for repairs to the property?

No. However, a home buyer may wish to utilize an FHA 203K streamline loan to finance repairs on the property.

21. How much money do I have to put down on a home?

The answer depends on the type of financing being used. For FHA financed properties, the down payment is 3 ½ percent (3.5%) of the sales price.